Posted on 12/08/2010 9:49:07 AM PST by FromLori
There is only so long that the Bundesbank can keep ignoring the fact that it has recently started piling on failed auction after failed auction. Today, Germany tried to sell €5 billion in 2 Year 1% Schatz notes. And while the official tally on the auction was a 1.1 Bid To Cover at a 0.92% average yield, just above our own 3 Year auction yesterday, (and a drop from the 1.4 previously) this was yet another failed auction, as the bank managed to get only €4.33 billion in competitive and non-competitive bids. The kicker: the Bundesbank retained €995 million of the issue, a whopping 20% of the proposed issue size - this is the amount it could not find any buyers for, and the deficit to what have been a non-failed auction. In other words, after the entire world was rushing to buy German paper, suddenly there is nobody willing to get in.
More from Market News:
The German federal government sold E4.005 billion of the 1.00%-coupon December 2012 two-year notes (Schatzanweisung) at a minimum price of 100.14 the Bundesbank announced Wednesday.
The weighted average price was 100.167. The average yield on the sale was 0.92%, while the bid-cover ratio (excluding retention) stood at 1.1, lower than the 1.4 b/c at the last 2-year auction on November 11.
One hundred percent of bids at the minimum price were accepted. The Bundesbank retained E995 million (or 17.9%) of the issue for its open market operations, bringing the total tranche to E6 billion, as expected. [ZH: this should say 5]
There were a total of E4.575 billion in bids for today's sale. The bids included E2.325 billion in competitive bids and E2.005 billion in non-competitive bids.
The world is avoiding government paper? Wonder what the ARE buying? Hmmmmmmm,,,,,
Wouldn’t it be funny, the returning to gold/silver standard via people voting with their feet! Heavily in China, Europe, the mideast, India, Russia, and increasingly here,,, the rubes are moving into inflation proof assets.
The government will eventually be forced to confiscate or back their currencies so they can compete.
Interesting times.
lol. People know something bad is about to happen.
Not really. People are refusing the offered rates, not the capability to pay. Bonds are auctioned and all things sell at the right price. What the market is saying is that there are better options for the same risk out there. All governments will soon have to increase the interest that they are offering and if you think its hard to service the debt at 1%, just wait until we are servicing it at 10%.
This is just the reversal of the flight to quality trade in Europe.
Germany had a Bond Auction failure?
They are the strongest economy in Europe.
Not good.
Confiscation was a one time deal, and only because the government was trying, sort of, to maintain a gold standard internationally.
If they tried it again it would be met with very, very little cooperation and yet signal to everyone that they are desperate. After all, the government already has Fort Knox, and therefore enough funding to run operations for several weeks if not months, even. /s
It’s an interesting quandary - whether or not the gold standard imparted a stronger adherence to good governance and rule of law, property rights, individual liberty, etc, is an open question. On the other hand, mortgages back in the good old days were minimum 50% down, renewable yearly and callable at any time. In gold, of course. It’s just unfortunate that the pendulum has swung so far the other way threatening so many with ruin.
Funny money is certainly no joke..
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