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Germany sells five-year notes in Euros at a negative yield of -0.08%

Monday, March 2nd 2015 - 06:21 UTC
Full article 6 comments
By buying bonds with a negative yield, investors are essentially prepared to pay Germany for the right to hold its debt if they retain those bonds until maturity. By buying bonds with a negative yield, investors are essentially prepared to pay Germany for the right to hold its debt if they retain those bonds until maturity.
Beginning this month the E.C.B. is aiming to make €60 billion a month in purchases of government bonds and other debt to try to stimulate growth. Beginning this month the E.C.B. is aiming to make €60 billion a month in purchases of government bonds and other debt to try to stimulate growth.

The German government sold five-year notes at a negative yield for the first time in its history on Wednesday. The milestone comes as the European Central Bank prepares to begin a bond-buying program, known as quantitative easing, in hopes of stimulating growth in economies across the Continent.

 The German Finance Agency sold 3.28 billion Euros, in government notes set to mature in April 2020 with an average yield of -0.08%, according to the Bundesbank, Germany’s central bank. That compared with an average yield of 0.04% when the government sold €4.04 billion in debt at auction in January.

By buying bonds with a negative yield, investors are essentially prepared to pay Germany for the right to hold its debt if they retain those bonds until maturity.

Investors, however, can potentially sell those bonds for a gain in the short term if corporate and government spending takes off in Europe after the E.C.B. begins its bond-buying program this year, said Alberto Gallo, the head of European macro credit research at the Royal Bank of Scotland. “Obviously, this could be a positive or a very big negative. It depends on how corporate and sovereigns react,” Mr. Gallo said.

Beginning this month the E.C.B. is aiming to make €60 billion a month in purchases of government bonds and other debt to try to stimulate growth.

Negative-yield bonds are the fastest-growing asset class in Europe, with about 30% of European sovereign bonds trading at a negative yield, Mr. Gallo said. Some corporate bonds have also fallen to a yield below zero in the secondary market, he said.

For some large financial institutions, buying German debt at a negative yield is still a better option than keeping money on deposit in Switzerland or with the E.C.B., both of which are charging banks to hold money above certain thresholds, Mr. Gallo said.

This month, Finland became the first Euro zone country to sell its five-year sovereign debt at a negative yield, and it has now been followed by Germany, whose debt is widely traded.

The five-year debt of several other European countries has recently traded at levels that produced negative yields, including Austria and the Netherlands.

Categories: Economy, Politics, International.

Top Comments

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  • Briton

    Despite opinions, some souses say that Germany is growing faster and more influence than it wanted too,

    something abt not emerging to soon as boss ?
    before the rest sign up to a European union.
    just a german Frenchy thoughty...

    Mar 02nd, 2015 - 11:55 am 0
  • yankeeboy

    This is bad news for the EU.
    I don't see it lasting much longer in its current state.
    UK should get out while they still can.

    Mar 02nd, 2015 - 02:48 pm 0
  • Britworker

    I think the Germans are starting to wake up to the fact that leading this is EU thing just isn't worth it. Greece will ultimately bring the EU down and I bet quite a few of the more wealthy EU countries will already have their exit strategy planned.

    The UK is positioned better than most, we buy far more from them than they us, we need to continue to diversify our export markets before the messy end.

    Mar 02nd, 2015 - 05:24 pm 0
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