Spotted by Denis Cooper in the FT:
Germany saw one of its poorest debt sales on Wednesday in what was seen as a failed auction by many market participants amid fears the eurozone’s debt crisis is spreading all the way to Berlin.
Marc Ostwald, at Monument, said "I cannot recall a worse auction ... If Germany can only manage this sort of participation, what hope for the rest. Yields are at completely the wrong level."
Mr Oswald said the bid-to-cover ratio was only 0.65 times as the German debt agency sold just €3.644bn of its new 10-year Bund of the €6bn targeted.
Chuckle, chuckle, tee hee, people are starting to worry about the German government having to bail out all the other Euro-zone countries.
As Denis points out, Germany hasn't had a failed bond auction for nearly three years.
Wednesday, 23 November 2011
Schadenfreude ist die schönste Freude!
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8 comments:
I don't actually think the lack of demand in the auction was primarily because of fears about Germany bailing the rest of the EZ out. So much capital has flowed out of the periphery into the bund market that yields have been depressed for the usual buyers who are buying for the long-term. The uncovered auction might be a rogue or the start of a general buyers strike. Germany often do syndicated debt sales rather than auctions so we may see more syndicates. Izabella Kaminska had a good note on the Bundesbank retaining some of the auction for market operations is not that unusual.
http://ftalphaville.ft.com/blog/2011/11/23/759801/the-bund-that-broke-the-bundesbank/
No matter what the cause of the uncovered auction this is a big story. Germany are just not as safe as some assume if the EZ collapses.
We have to pluck the mote for thine own eye first it seems
http://www.zerohedge.com/news/goldmans-sigma-x-hints-who-next-contagion-target
AC1
When my wife sells her index-linked gilts, what should she buy instead?
The Euro debt market is increasingly looking like some sort of CDO; a package of mortgage securities of varying quality with an average yield greater/lower than many of its constituent parts. The Euro was and is always secured on Germany - it's a sort of Deutschemark lite. I think investors are waking up to this.
And in any event can someone explain to me how the ECB and other central banks are now being talked about as lenders of last resort to failed governments? This seems bonkers and is not what I understood 'lender of last resort' to mean - that is lender of last resort to commercial banks, not countries.
R, it might be a storm in a teacup, who knows?
AC1, who or what is Sigma X? Common sense tells us that GS and others are taking positions and then manipulating sentiment, the Euro was probably their idea in the first place.
D, don't ask me. I'm a safety first type investor at the moment, £85,000 per bank, end of.
L, nobody can explain to you because it can't possibly work.
LOLR means you are bigger than the people you are bailing out. So a national central bank can bail out a small commercial bank, a government can bail out its own central bank etc, but Germany cannot bail out the whole world, even if it were so minded.
MW - And as I said, a central bank cannot bail out a government - except by 'printing money', and we all know what that leads to...
"...not what I understood 'lender of last resort' to mean - that is lender of last resort to commercial banks, not countries." I understand that Bagehot meant lender of last resort to solvent but illiquid commercial banks. Since many banks are insolvent(don't you think?) the LOLR should have no bearing on them. Or should that be "no Barings"?
L, agreed.
D, if you think that bank bonds are liabilities, then many banks might be or be close to being insolvent; if you count bank bonds as part-ownership, then no, no UK bank is anywhere near being insolvent.
And their cash flows are healthier than ever, as they have more or less stopped paying interest while raking in normal mortgage repayments interest and capital.
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