The market is sending a very negative message to Germany. If it's not a complete vote of no confidence then it's
certainly a partial one
Posted on 11/24/2011 3:38:49 PM PST by bruinbirdman
Germany felt the euro crisis on Wednesday as investors deserted its attempt to issue new debt.
The market is sending a very negative message to Germany. If it's not a complete vote of no confidence then it's
certainly a partial one
The eurozone's anchor was left holding 35pc of the 10 year government bonds, known as bunds, which it tried to auction. Its failure immediately sent borrowing costs for other countries even higher, notably France and Italy. But Germany itself saw yields jump and since November 9 they have risen from 1.7pc towards 2.1pc.
The market is sending a very negative message to Germany. If it's not a complete vote of no confidence then it's certainly a partial one. And if investors are getting queasy about buying German debt, then you can bet your bottom euro they're sick to the back teeth of other eurozone debt.
So the chances of other countries succeeding in refinancing their borrowing needs in the next few weeks and months receded significantly after yesterday. If it's bad for Germany, it's a disaster for her eurozone partners. If investors are unwilling to buy German debt it's hard to see what they will buy.
Markets are now turning sour on Germany because of the increasingly fast-paced dumping of eurozone exposure in general by financial investors. Contagion has made all aspects of the system toxic.
That's exacerbated emerging fears over Germany's role as the ultimate lender of last resort to the eurozone. It has always been assumed that Germany would get its cheque book out. But that in turn assumed it would be able to generate support in the bond markets itself.
Turkey is a plump market for exports
Predictably German bunds were not the only bad news coming out of Europe. Yesterday
(Excerpt) Read more at telegraph.co.uk ...
Bond markets may be even more important to national economies than stock markets. And bond issue failures can create havoc as much, if in a different way, than a stock market crash.
In the US, a good example of this are credit card company bonds. They must issue bonds to cover the enormous potential debt of their cardholders. And their bonds are regarded as #2 behind US Treasury bonds for safety and reliability.
But last year, out of all their bond issues, a single issue failed, and the credit card companies had to panic, and started canceling cards all over the US to reduce their debt exposure. But if they had 3-5 debt issue failures, it would effectively put them out of business. Suddenly, every credit and debit card would become useless.
yitbos
Never mind “maybe more important.” Bond markets are truly the bottom line. Stck markets can be and are manipulated. When your bonds dont sell, it’s bye bye (fill in company, country, city ...
That’s a very low yield, relative to some of Germany’s neighbors. I wonder what the yield is on the gilt.
What’s amazing to me is that Obama sees all this, and thinks that it has nothing to do with the US. The lesson is completely lost on him.
Bond markets are more important to both government and the private sector than equity or commodity markets.
Not “may be.” Are, without question. If we liken the various markets to parts of a dog, then the markets go like this: The commodities market is the tail. The tail can wag, and maybe the tail can wag hard enough to make the dog’s buttocks wiggle a bit too. The stock market is likened to the dog’s butt.
The nose, head, front shoulders and lungs are the bond market. Whereever they go, the other two markets can wiggle and wag, but they’re going to follow. They have no choice.
The reason why too many people ignore the bond markets is that in the bond markets, they don’t want to talk to you if you’re talking about buying less than about $25K per trade. So many retail investors don’t bother buying/selling/trading bonds directly; they go through ETF’s and mutual funds.
Since most debt is priced in the EU’s debt markets as a spread off the Bund, (just as most USD denominated debt is priced off the 10 Year T note), the higher the Bund’s yields go, the higher everyone’s yields go until/unless the spreads come in.
And the spreads aren’t coming in.
Your talking about a guy who couldn't figure out how to use a porta potty last week.
The euro is toast. It will probably make another recession here a certainty. The dollar is bound to spike in value and Europe is going to be in a serious recession, if not depression. Bad news all around. Good for u.s. bond holders though...-
It appears that the UK bond yield is a little higher for a 10-year.
Obama isn’t a deep thinker. He really isn’t.
Oops...a little higher, at .03 of a percent. ...not much difference.
Ping...
.
Well I think it was a one-time aberration, wouldn’t surprise me if it was a set-up (Soros, China, the Fed?[Obama hates Merkel]).
No, I don’t know the market- but I do know people.
its a “no confidence” in the EU and the welfare states
It is the month of August, on the shores of the Black Sea. It is raining, and the little town looks totally deserted.It is tough times, everybody is in debt, and everybody lives on credit.
Suddenly, a rich tourist comes to town.
He enters the only hotel, lays a 100 Euro note on the reception counter, and goes to inspect the rooms upstairs in order to pick one.
The hotel proprietor takes the 100 Euro note and runs to pay his debt to the butcher.
The Butcher takes the 100 Euro note, and runs to pay his debt to the pig grower.
The pig grower takes the 100 Euro note, and runs to pay his debt to the supplier of his feed and fuel.
The supplier of feed and fuel takes the 100 Euro note and runs to pay his debt to the town's prostitute that in these hard times, gave her "services" on credit.
The hooker runs to the hotel, and pays off her debt with the 100 Euro note to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.
The hotel proprietor then lays the 100 Euro note back on the counter so that the rich tourist will not suspect anything.
At that moment, the rich tourist comes down after inspecting the rooms, and takes his 100 Euro note, after saying that he did not like any of the rooms, and leaves town.
No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism.
And that, ladies and gentlemen, is how the governments of the world are doing business today.
Excellent!!!
2.16%
German bund rate above gilt is very significant. This is another reason news out of Deutschland is important.
yitbos
German bund passed the gilt. France tomorrow.
One reason brokers don't push bonds to retailers/individuals is that they tend to hold to maturity. Not much commission/churn.
yitbos
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.