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Thread: Germany Sells Five-Year Debt at Negative Yield for First Time on Record

  1. #31
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    Re: Germany Sells Five-Year Debt at Negative Yield for First Time on Record

    Quote Originally Posted by iguanaman View Post
    All is not well in Europe. Their economies are suffering from the bank installed austerity and the continued absence of the "Confidence Fairy" that was to be their savior. They are only now getting around to QE when their economies are dangerously close to deflation from previous tight money policies. Thankfully we did not fall into that trap here. Thank you Obama.


    Euro Area Government Debt to GDP | 1995-2015 | Data | Chart | Calendar


    Oh yeah, the EU was so frugal...NOT.
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    'We are all the sum of our tears. Too little and the ground is not fertile, and nothing can grow there. Too much, the best of us is washed away.'
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    Re: Germany Sells Five-Year Debt at Negative Yield for First Time on Record

    Quote Originally Posted by DA60 View Post
    Those deficits are from crashing GDP's and you know it. You also know that the Euro bank just recently started QE. They kept money too tight and spent too little and are paying the price. I believe that is what you want for us too.... to pay a price. You lost your chance with Romney...

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    Re: Germany Sells Five-Year Debt at Negative Yield for First Time on Record

    Quote Originally Posted by iguanaman View Post
    Those deficits are from crashing GDP's and you know it. You also know that the Euro bank just recently started QE. They kept money too tight and spent too little and are paying the price. I believe that is what you want for us too.... to pay a price. You lost your chance with Romney...
    Wrong.

    image.jpg

    Euro Area GDP | 1960-2015 | Data | Chart | Calendar | Forecast | News


    image.jpg

    Euro Area Government Budget | 1995-2015 | Data | Chart | Calendar


    True, the GDP fell just over 10% in 2009, but debt to GDP went up about 14%.

    And compare 2008 to 2010, the latter GDP was slightly higher then in 2008, yet spending as a percentage of GDP skyrocketed.

    This austerity you speak of is in name only.


    Pleaae stop guessing when you speak and you will save us both lots of time.
    'What kind of sick and twisted toy factory is this?'
    'We are all the sum of our tears. Too little and the ground is not fertile, and nothing can grow there. Too much, the best of us is washed away.'
    "Better to be dead and cool, than alive and uncool."

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    Re: Germany Sells Five-Year Debt at Negative Yield for First Time on Record

    Quote Originally Posted by Chainsaw View Post
    Anything that is good = Obama is responsible and did it personally.
    Anything that is bad = Bush/Republicans did it.

    Wise up man!!!!!
    Bush is at fault for that too!

    But Obama is trying to steal that cookie.

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    Re: Germany Sells Five-Year Debt at Negative Yield for First Time on Record

    Quote Originally Posted by DA60 View Post
    But it looks to be tapering off!

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    Re: Germany Sells Five-Year Debt at Negative Yield for First Time on Record

    Quote Originally Posted by DA60 View Post
    Wrong.

    image.jpg

    Euro Area GDP | 1960-2015 | Data | Chart | Calendar | Forecast | News


    image.jpg

    Euro Area Government Budget | 1995-2015 | Data | Chart | Calendar


    True, the GDP fell just over 10% in 2009, but debt to GDP went up about 14%.

    And compare 2008 to 2010, the latter GDP was slightly higher then in 2008, yet spending as a percentage of GDP skyrocketed.

    This austerity you speak of is in name only.


    Pleaae stop guessing when you speak and you will save us both lots of time.
    Do you know off hand, if that is PPP data? Otherwise i can look it up, when I get home. But if you know.

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    Re: Germany Sells Five-Year Debt at Negative Yield for First Time on Record

    Quote Originally Posted by OrphanSlug View Post
    This is what happens when the EU talks about Quantitative Easing, spread across the EU nations who are at different points in fiscal and debt condition. There is pressure on bonds (not just in Germany) given this prospect of the European Central Bank engaging in a €60 B per month bond buying program. The result is a negative yield for these German Bonds due to deflation. Germany, just before this ECB program is to get going, issued €3.28 B five year notes at minus 0.08 percent. The yield on this term German notes has been in decline ever since Q1 2013. But what this did was beat out Finland, who last month did a minus 0.02 percent yield under similar conditions. The difference is Germany has a bigger bond market with a more global grouping of buyers. Because of these movements and what happened with these German bonds, is it assumed that eventually (if not already) that Finnish, Dutch, Austrian and German should all end up with negative bond yields (which means the bond price is up.) Match that to other EU nations where this is not happening the same way and you should be able to see the concern.

    Things are about to get more interesting as we talk about which nation within the EU continually has to shift debt around, or outright ask for debt forgiveness.
    Things did get more interesting.
    An amazing development.
    Due to Negative interest rates, in some cases, banks have to Pay borrowers!

    Tumbling Interest Rates in Europe Leaves Some Banks Owing Money on Loans to Borrowers
    Subzero rates have put some lenders in an Inconceivable position
    PATRICIA KOWSMANN in Lisbon and JEANNETTE NEUMANN in Madrid
    Updated April 13, 2015 7:13 p.m. ET
    Tumbling Interest Rates in Europe Leaves Some Banks Owing Money on Loans to Borrowers - WSJ
    Tumbling interest rates in Europe have put some banks in an inconceivable position: owing money on loans to borrowers.

    At least one Spanish bank, Bankinter SA, the country’s seventh-largest lender by market value, has been paying some customers interest on mortgages by deducting that amount from the principal the borrower owes.

    The problem is just one of many challenges caused by interest rates falling below zero, known as a negative interest rate. All over Europe, banks are being compelled to rebuild computer programs, update legal documents and redo spreadsheets to account for negative rates.

    Interest rates have been falling sharply, in some cases into negative territory, since the European Central Bank last year introduced measures meant to spur the economy in the eurozone, including cutting its own deposit rate. The ECB in March also launched a bond-buying program, driving down yields on eurozone debt in hopes of fostering lending.

    In countries such as Spain, Portugal and Italy, the base interest rate used for many loans, especially mortgages, is the euro interbank offered rate, or Euribor. The rate is based on how much it costs European banks to borrow from each other.

    Banks set interest rates on many loans as a small percentage above or below a benchmark such as Euribor. As rates have declined, sometimes to below zero, some banks have faced the paradox of paying interest to those who have borrowed money from them.
    [.......]
    Last edited by mbig; 04-14-15 at 01:53 PM.
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    Re: Germany Sells Five-Year Debt at Negative Yield for First Time on Record

    Quote Originally Posted by mbig View Post
    You think our Rates are Low?
    With a new EU QE coming, rates have been low and now are ridiculous.
    Even dubious Italian and Spanish 10 year paper yield LESS than the same USA debt.
    Other, shorter term issues, have sold at negative yields, but never anything like 5 year ones.

    Germany Sells Five-Year Debt at Negative Yield for First Time on Record

    Move Reflects Plummeting Borrowing Costs Across Europe
    By EMESE BARTHA And BEN EDWARDS
    Updated Feb. 25, 2015 9:20 a.m. ET
    Germany Sells Five-Year Debt at Negative Yield for First Time on Record - WSJ



    Here were Rates on Major economy 10 Year Treasuries as of Last Night. Also WSJ.

    U.S. 10 Year _ _ _ _ _ 1.991
    German 10 Year _ _ _ 0.333
    Japan 10 Year _ _ _ _ 0.348

    U.K. _ _ _. _ _ _ _ _ _ _ 1.72
    Italy _ _ _ _ _ _ _ _ _ _ 1.45
    Spain _ _ __ _ _ _ _ _ _ 1.38

    So guess whose Bonds the Chinese and other Large Sovereigns and Private Pensions just about Have to Buy?
    Only the USA has the size and yield.
    OK Mr Finance Wizard, here's your chance to shine. Why does something like this happen? I am not asking that as some sort of insult or smart remark. I am sincerely asking so that I can understand what makes this sort of thing happen.

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    Re: Germany Sells Five-Year Debt at Negative Yield for First Time on Record

    Quote Originally Posted by DA60 View Post
    First of all. HAHAHAH total fail in looking at the situation.

    Secondly, GDP falls because of a contraction of the private sector. Now the public sector will increase because of higher unemployment and the higher cost involved with this. Now this cost increase means at least in the short run, that any austerity in the public sector is counter-weighed by the rise in unemployment payments and other related payments.

    Basically, fire 100k public workers, and you go from paying them wages to unemployment because the private sector aint gonna hire them as they also are shedding workers.

    Thirdly because you are using total "euro" area, you do not distinguish between individual countries and that causes a number of problems. Not to mention the use of % of GDP is often really bad idea when GDP is going all over the place. It of course works both ways... when there is suddenly growth in the economy, then the total debt vs GDP will fall fast as hell, yet the actual number wont... but you know that right?

    And compare 2008 to 2010, the latter GDP was slightly higher then in 2008, yet spending as a percentage of GDP skyrocketed.
    And you dont know why? Open your eyes.... and look a the explanation above.

    This austerity you speak of is in name only.
    Bull****. It seems to me that so many right wingers have no idea how a basic economy fits together... they all think it is so freaking simple .. just cut, and those cuts have no consequences what so ever on the overall economy. And austerity has as much to do with intent, as it has to do with actually cutting the fat.

    For example, in Spain they have been cutting deep into the public sector, especially around hospitals and schools. This has caused less workers in those areas, less resources... which in turn means higher unemployment among people related to those sectors, which means more unemployment insurance and other help to those out of work. Oh dont forget that because those people are out of work, then that means they spend less.. which means the places where they usually spend, have less revenue, so they have to cut workers as well... who then need unemployment insurance as well.

    So sure, cut unemployment insurance as well.. that will get them of their lazy asses no?.. oh they have, but you can also cut too much and that will cause social problems across the board.. including riots and worse. And you would say so what.... they should just find work right? Well a bit hard when there is none, because there is no demand for goods and hence the will to hire people .. but I guess they could join the police to stop the riots..oh wait, the police is also hit by austerity so there has been a hiring freeze and wage freeze there, so chances are that the police might actually join the rioters. Okay, join the military right? They can beat the population into line right? Oh wait, that has been cut also..

    But hey, at least the 1% got tax cuts right?
    PeteEU

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    Re: Germany Sells Five-Year Debt at Negative Yield for First Time on Record

    Quote Originally Posted by mbig View Post
    Yes.
    So if you buy $1,000,000 worth of Bonds, you have to GIVE them an additional $1600 a year for 5 years, and in 2020, you will be guaranteed to have $992,000.

    Not most people's idea of 'investment', tho short term rates have been virtually zero in many countries for quite a while.
    Generally if someone buys into that, it's because of safety (instead of putting money into more volatile places where they can lose even more). So although that sounds ****ty to most people, you'll be surprised that some want to buy into that.
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