When the financial media says that governments get paid to issue negative yielding debt, that is not exactly true: most sovereign issuers still pay out a cash coupon, a modest as it may be, while they pocket the negative amortization on a bond issued above par for the life of the bond resulting what ultimately ends up being a negative yield for the buyer net of all cashflows at maturity. However, the lower – or more negative – yields get, the less the need for an issuer to actually pay a cash coupon: after all with a negative yield, it is essentially superfluous.

Still, while no sovereign has issued bond with negative cash coupons yet, some are starting to issue zero-coupon ten years: bonds which pay no cash coupons at all.

This is precisely what Germany is about to do in a few hours.

According to Bloomberg, on Wednesday morning Germany will sell 10-year bonds with a zero coupon for the first time, as a rally in fixed-income securities pushes investors to forgo annual interest payments in order to hold the safest assets.

The nation is selling €5 billion of zero percent bonds due in August 2026 on Wednesday, after yields in the secondary market dropped to an all-time low of minus 0.205% last week.

Then again, with a rather vicious snapback higher in yields over the past two days now that Japanese helicopter money looks increasingly probable, Germany may not be able to continue this experiment for much longer, and may have to revert back to its 0.5% coupon issued until now.

Of course, once this latest modest spike in yields subsides and the world reverts back to its deflationary trendline (a move which will eventually prompt every other central bank, not just Japan – to proceed with helicopter money), and German yields are deeply negative, Germany can then proceed to, if only in theory, issue “negative” coupons, demanding that bond buyers pay Germany. Of course, while in practice this is impossible, it would present the world with such an interesting thought experiment as the “inverse” bankruptcy: a state in which the creditor to the debtor “defaults” because it is unable to make a payment on a bond they lent to the same debtor.

Yes, the new normal sure is interesting. If only in theory.