Dan Weil writes at The Wall Street Journal:
The economic turmoil sparked by the coronavirus has brought on the possibility of negative interest rates. But negative rates don’t necessarily mean negative results for bond-fund investors.
Rates going below zero mean that bond yields will shrink—and the dividends over the life of the bond plus the proceeds of the principal at maturity may not cover your purchase price.
But even if rates go negative, bond funds would still perform their traditional role as a diversifier and stabilizer for an investment portfolio—investors would just receive a lower income stream from them, investment managers and analysts say.
If some Treasury bond yields go negative, most corporate bonds likely won’t, leaving fund managers with plenty of options.