Investors are paying to hold large chunks of European government debt — something that would have sounded absolutely absurd in 2011 or 2012. Roughly half of certain bond classes in the euro area now offer negative rates, according to Goldman Sachs. Normally, when you buy bonds from governments, the government pays you interest in return for your cash. But because the European Central Bank is trying to flush cash out of the banking system and into the economy, they are using negative interest rates to deter investors from parking cash in "safe assets" like government debt. Banks are guaranteed to lose money if they take on bonds with negative yields. And yet they're doing it anyway. Goldman Sachs analysts just sent round a chart below showing how dominant negative yields on European government debt have become. It's a bizarre situation: Usually investors demand that premium for holding government debt, just in case the state defaults. And a couple of years ago, with a eurozone breakup looking quite possible, investors wanted big premiums for holding the debt of many of the shakier countries. The situation now has completely transformed: Pretty much half of all eurozone government bonds maturing in less than 7 years are offering a negative yield — a small portion of the 7-10 year bonds are doing the same. Although no euro-using countries have 10-year bonds yielding negative rates yet, Germany's are currently offering just a 0.143% return (and falling). It's a world away from the euro crisis just a few years ago — check out some of the countries included in the disclaimer there. Ireland's two-year bonds have negative yields, while they were above 14% less than four years ago. Spain's 2-year yields are heading that way too: They're currently yielding less than 0.1%. The scary thing is that the demand for negative yields suggests investors believe that the alternatives — stocks, or a Greek default — are even riskier.Join the conversation about this story » NOW WATCH: You've been doing pull-ups all wrong
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