It was just as impressive the first two times Corry El pointed out the same fact to you.
This happened in the US, too, but only briefly on the shortest duration T-bills. When the Treasury sells a bond to the public, they have a special type of auction. It doesn’t work quite like the fast-talking auctions of middle-America, but nevertheless, it’s a kind of auction.
Buyers bid on the opportunity to get paid back 1000 dollars in a certain time period, for example one month or one year. If buyers bid 500 dollars to get paid back 1000 in a year’s time, that would be a 100% annual interest rate. But as it happens in these auctions, buyers can and sometimes do keep bidding until they are literally paying more money in today than they will get back in one month’s time. If buyers pay 1001 dollars to get paid back 1000 in a month, then that is a negative nominal interest rate.
This has been a fairly regular occurrence since 2008. It doesn’t happen everywhere, but it does happen.
What is the alternative?
What can they do with their money otherwise?
Keep it in the bank? Banks fail. Deposit insurance only covers the first couple hundred thousand in the US, and is similarly limited in other countries. A bank deposit is nothing more than an IOU from the bank, to you, saying that they owe you money whenever you ask for it. But the bank has many other IOUs, to many other people, and if the bank fails, not everybody the bank owes money to is going to get paid back. If people have a few million in a deposit account at the bank, and the bank goes under, the FDIC is not going to cover the full loss. So you’re screwed.
Buy stock with it? Risky. Stocks can go up, but they also go down. For people who favor relative stability, rather than taking the risk of a big loss, stocks are not really a good option.
Start a new business with it? Again, risky. People don’t know what businesses will be successful in the future. If you have enough money, you can build a new widget factory, but there might not be enough demand for whatever kinds of widgets you decide to make that will allow you to break even, let alone earn a positive return on that factory.
Put it in a vault and swim in it like Scrooge McDuck? Expensive. If you withdraw the money from all risky financial institutions and just take the cash for yourself, then you’re not going to suffer a negative interest rate loss on that cash. But then you still have to protect the cash, transport it, account for it, make sure the same amount of money is there in the vault tomorrow that you put inside of the vault yesterday. Scrooge can do that quickly with his daily swim, but most other people cannot. Clever thieves have drilled out gold bars and replaced the innards with tungsten in order to fool the owners into believing it was pure gold through and through. Cash they might replace with lower denominations, and you won’t know the bundles are filled with Washingtons instead of Franklins until you unwrap them and check.
Or… you can lend money to the government, and they get to protect the cash for you. If lots and lots of people are afraid of every other place to put the money, then they will bid up the price at those auctions. Eventually, they can and do bid up the price so high that they’re paying more than 1000 euros today to get paid back 1000 in the future. The negative nominal interest is a warehouse fee. You are paying the government to protect your money, rather than risking it in a private enterprise that might go bankrupt. It’s not just bonds, either. Plenty of central banks charge private banks a sort of “warehouse fee” for holding cash at the central bank. (This includes the Swiss National Bank, the Bank of Japan, the Swedish Riksbank, the European Central Bank, and Danmarks Nationalbank.)
The principle is the same. The banks have cash. They “store” the cash on the central bank’s accounting computers, and pay a small percentage fee for doing so. If they thought they saw a safe storage place that yielded more, then they would use that instead. But they don’t. They’re scared of everywhere else, so they keep their cash instead of spending it, and pay the warehouse fee to the government’s bank for the service of doing so. (Private banks have to report all theircash reserves to the central bank, so I think they have to pay the same fee even if they store the cash in their own vault. This is the penalty they pay for holding cash instead of buying other assets, which would put the cash into circulation.)