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Investors wanting safe parking for their money buy 0% German bonds

Thursday, August 23rd 2012 - 05:59 UTC
Full article 3 comments
However German yields were above zero for the first time in five weeks  However German yields were above zero for the first time in five weeks

Germany got bids for 6.24 billion Euros of two-year notes at an auction Wednesday exceeding its 5 billion-Euro maximum sales target, according to a statement from the Bundesbank.

The nation sold the securities due in September 2014 at an average yield of zero percent, compared with minus 0.06% at an auction of similar-dated debt on July 18. German bonds had declined on the previous two days, pushing two-year yields above zero for the first time in five weeks amid speculation European leaders are making progress in solving the region’s debt crisis.

“You could argue on a very cheeky scale that this may even be a bargain to catch it at zero,” said David Schnautz, a fixed-income strategist at Commerzbank AG in New York.

“There are a lot of hopes, but there’s also a lot of disappointment potential. For all those who still seek a very safe parking lot for their money, buying the two-year German paper at nothing is actually still a valid trade.”

The yield on the previously issued German note due in June 2014 fell one basis point, or 0.01 percentage point to minus 0.006% at trade closing. The yield climbed as high as 0.02% on Tuesday after being negative since July 12.

A negative yield means investors who hold the security until it matures will receive less than they paid to buy it.

Top Comments

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  • British_Kirchnerist

    What even is a 0% bond? 0% of anything is nothing but I can't believe they're wanting to get nothing back!

    Aug 23rd, 2012 - 12:07 pm 0
  • ManRod

    better no gain but secured money, than losing EVERYTHING while buying argentine bonds. That's probably the thought of the investors.

    Germany says “thank you” to Argentina for granting them these conditions. The reward for trustful, due-fullfilling and responsable governments. Simply said, something that goes beyond your Kirchnerist world... its only consequent that you can't believe it.

    Aug 23rd, 2012 - 10:00 pm 0
  • British_Kirchnerist

    0% extra return is perhaps believable, I read the article quickly and imagined that to multiply anything by 0% is to wipe it out entirely and rather obtusely made the point that can't be what they're talking about!

    Aug 24th, 2012 - 12:56 am 0
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