EU: German bond auction 'disaster' rocks markets

The Telegraph ^ | 11/23/2011 | Angela Monaghan

[bruinbirdman]

A failed German bond auction provided the clearest sign yet that even the strongest eurozone country is at growing risk of crisis contagion.

The German government was unable to sell about 35pc of the €6bn (£5bn) 10-year bonds it offered to the market, getting just €3.9bn of debt away. The setback came as Fitch Ratings issued a warning that France’s AAA credit rating would be at risk should the crisis result in a sharper downturn in the country than currently envisaged.

“The sovereign debt crisis may have had its most critical day yet,” said Kathleen Brooks, research director at Forex.com. “If Germany can’t sell debt then where does that leave the eurozone? While we all knew about problems in Italy, Spain and maybe even France, Germany was the black swan no one expected.”

Investors in German government debt were offered just a 2pc return annually over 10 years, despite the escalating risks posed by the sovereign crisis in the region.

There was increasing speculation yesterday that medium and long-term funding in Europe has now completely frozen, and European stock markets fell across the board. The CAC 40 in France closed down 1.7pc and the German DAX fell 1.4pc. The failed auction also sounded alarm bells in the City. Marc Ostwald, strategist at Monument Securities, declared it a “complete and utter disaster”.

The FTSE 100 endured its worst losing streak since 2003. The blue-chip index closed in negative territory – falling 67.04 points to 5139.78 – for an eighth day in a row. According to the FTSE Group, the last time the market fell for more than eight days in a row was between January 15 2003 and January 27 2003, when the blue-chip index fell for nine days.

The European Central Bank said the auction result

[Lysandru]

“The sovereign debt crisis may have had its most critical day yet,” said Kathleen Brooks, research director at Forex.com. “If Germany can’t sell debt then where does that leave the eurozone? While we all knew about problems in Italy, Spain and maybe even France, Germany was the black swan no one expected.”

What do you mean "no one" Ms. Brooks? I have long believed that the Eurozone was heading for an EPIC FAIL and I have been reading recently how Germany has feet of clay.

[ClearCase_guy]

They used to talk about the PIIGS who were in financial trouble.

I think now if may be PIGGSGFAPSCBLND and any other European country I can't think of right now.

[Billthedrill]

Investors in German government debt were offered just a 2pc return annually over 10 years, despite the escalating risks...

Wait. Wait a minute, don't rush me...I...I...I think I see the problem here...

[RetiredTexasVet]

I don’t think it took a financial genius, seer, or well educated 6th grader to see this coming. How obvious does EU bankruptcy need to be ... just the word Socialism should trigger thoughts of depression, financial collapse, incompetence, epic failures, etc.

[Maine Mariner]

Germany has a problem that we will face in the next few years. German workers can retire with excellent pensions.
However, they do not have enough workers, no matter how productive to support those retirees, rebuilt East Germany,
bailout Europe and so forth.

A more basic problem German workers do not want to work to age 65 so Greeks can retire at 50.

[Varsity Flight]

Repeating as I stated from the other thread:

“Euro ECB would love to have, the Mandate chains on every individual, like the Phony-Care here. But the europas are still very seperate states, and still can see the old castles outside where everyone else were SERFS.

If this Phony-Care isn’t stopped, and all the other govt.-RICO and the RICO-govt. stealing, then NO BUY. We THE PEOPLE quit buying ANYTHING. They Can’t FORCE Us,WE the People, to buy EVERYTHING. ...And employment 15-20-30-40-50 %, make my day.

And nice try on having govt. pensions prop the so called market.

Let My people go.

[I am Richard Brandon]

"We THE PEOPLE quit buying ANYTHING. They Can’t FORCE Us"

That is a challenge that the present administration would be quite willing to take you up on.

[familyop]

Maybe the German government could have a quasi-government office that’s called an independent organization, and that organization could print funny money to invest in German bonds. Then, everyone could shout through the propaganda outlets about the US collapse in order to chase fund managers to invest in the “safety” of German bonds. ;-)

[RayChuang88]

I think the great fear right now is that we could be heading towards a true collapse of just about every economic system on Earth within two months once the European countries start to default on their sovereign debt. Remember, most Asian banks--including those in China, Hong Kong, Japan, Singapore, South Korea and Taiwan--have a LOT of money invested in Europe and a European collapse could take down all these banks like a house of cards.

I will predict once that happens, we will be within two years of a general world war breaking out....

[bruinbirdman]

"a quasi-government office that’s called an independent organization, and that organization could print funny money to invest in German bonds"

That's pretty much what French and German banks were doing (among other nefarious and invisible transactions) with PIGS sovereign debt. While borrowing at less than 2%, they were lending it to PIGS for 4%+.

Reminds me of the Carter era Savings and Loan bubble scam. Savings and Loans (think Keating five) were buying and selling each others property while appraisers raised the values each time. Reagan had to fix it.

Same with the recent housing bubble values.

yitbos

[familyop]

Thank you. I was assuming that you’d notice my smart-aleck allusion to the relationship between our government and Federal Reserve. In reality, we probably wouldn’t do without the Federal Reserve, though, except maybe in a more “isolationist” economy. Without the Fed, while retaining the tendency total globalism, we’d be wiped out by our lack of defense in currency tussles.

[familyop]

BTW, it's looking that way, even with the Fed. That is, we're losing an international currency fight. The concerns of US investors and those on fixed incomes is understandable, but it appears that our prospects for future exports of finished goods are dimming more each year.

Some of our young folks without government-derived incomes are getting tougher than their predecessors (something seen from near the bottom). The "technocracy" (real definition, as differentiated from the new, popular use) so feared by many in contemporary government business will be more likely.

[bruinbirdman]

"we're losing an international currency fight."

Never.

The reason the buck is all powerful is liquidity. Our financial markets let anyone in the world convert whatever asset quickly.

I have a couple equities on the international OTC (BRGYY - British Gas and CPYYF - Centrica). Their volume is miniscule (they are huge companies) and the increment after offer is undeterminable. Fortunately, these are long term investments.

Transactions on the American boards are as fast as light.

yitbos