Germany for First Time Sells 30-Year Bonds Offering Negative Yields

[From Ashes To Glory 2]

Due to neither major political party in the US doing anything other than kick the can down the road for years with runaway federal spending, we may soon cross the Rubicon as well.



Germany sold 30-year debt at a negative yield for the first time, as investors desperate for safe assets bet that further falls in yields will boost the value of the bonds in the future.

Investors buying debt at a negative yield get back less than they paid if they hold on until maturity. In Wednesday’s sale, Germany borrowed €824 million ($914 million) through bonds that pay no interest. The bonds were sold slightly above face value, so when they mature in 2050, Germany will pay back €795 million.

Demand for government debt and high-grade corporate bonds has been huge this year, after major central banks responded to growing fears of a global slowdown with fresh rounds of interest-rate cuts or other looser monetary policy.


https://www.wsj.com/articles/german...ar-bonds-offering-negative-yields-11566385847

 

[Bankerreturns]

We have sorta already been there. During the roaring Obama economy banks started charging corporate customers to keep deposits in the bank.

 

[From Ashes To Glory 2]

True, but actually having a zero yield per the negotiable instrument issued by the sovereign (in this case a major economic power such as Germany) is disturbing to say the least.

 

[Bankerreturns]

Just says that investors are placing a very high value on safety, same reason gold has been climbing. You also have to put into context what interest rates have become with the overly controlling Fed. Back in the day the rule of thumb was - when interest rates are over 10%, buy bonds, when under 10%, buy stocks.

Can you even imagine what would happen if rates hit 10% these days? Most people under the age of 50 would think the world was ending. In saying that, if you look at credit risk spread, high quality government securities, shorter term ones, should be yielding around zero.

 

[From Ashes To Glory 2]

There may be a silver lining in all of this for the U.S. (in this context):

Kyle Bass says US interest rates will follow the rest of the world to zero — ‘This is insane’

Central banks are just getting started with monetary easing, hedge fund manager Kyle Bass said, predicting U.S. interest rates will keep falling and follow global interest rates all the way down to zero.

“We’re the only country that has an integer in front of our bond yields. We have 90% of the world’s investment-grade debt. We actually have rule of law and we have a decent economy. All the money is going to come here,” Bass, founder and chief investment officer of Hayman Capital Management, told CNBC’s David Faber on Tuesday.

Bass’ comments come as several central banks around the world have implemented stimulative policies to the point where around $15 trillion of global debt trades with a negative rate. Germany and France’s respective 10-year yields are in negative territory along with Japan’s benchmark rate. China has also implemented stimulative measures to mitigate slowing economic growth.

https://www.cnbc.com/2019/08/20/kyl...ro-this-is-insane.html?recirc=taboolainternal