Portugal in €1.2Bn bond auction

Portugal’s treasury and public debt agency issued €1.25Bn of government bonds for auction on 21 April.

It returned to the market again on Wednesday with two bundles of treasury notes with three and 11 month maturities at an amount between €1Bn and €1.2Bn.
According to a communiqué from the Agency for Treasury Management and Public Debt (IGCP), the auctions which were carried out today at 10.30am, have maturity dates for 17 September 2021 and 20 May 2022.
On 21 April, Portugal placed €1.25Bn with maturities at three and 11 months, with interest rates even lower than those are previous comparable auctions.
According to the IGCP page on Bloomberg, at that time 11 month maturity bonds worth €800 million were put up or auction with an average interest rate of -0.558%, at a lower interest rate than seen on 17 February when €625 million were put up for auction at an average interest rate of -0.524%.
The three month bonds were sold for €450 million at an average rate of -0.599%, also lower than that registered on 17 February when €625 million were auctioned at -0.543%.
Demand from investors/speculators reached €2.4Bn for the 11 month bonds, 3.04 times the amount placed for auction, and €1.641 for three month bonds, 3.65 times the amount put up for auction.
On 19 May Portugal issued €1.750Bn on the market, in six and 12 month bonds with interest rates falling to historic minimums for both bond issues. The €1Bn 12 month bonds at yields of just -0.536%. The six month €750 million worth of bonds offered an average yield of -0.571%, also lower than the issues on 17 March when €500 million of bonds were put up for sale offering yields of -0.554%.
So the question is why would investors/speculators buy bonds with negative yields? The bond market is seen as a safe haven in the case of a stock market in turmoil. If the banks are charging negative interest rates, then the outcome on the bonds may be better than leaving money in the bank.
When yields go negative, investors don’t actually pay the issuer. The premium is the difference between the purchase price and the par value of the bond. If the premium exceeds the income the investor will receive during their holding period, the yield will be negative.