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Germany Issues $4 Billion In Dollar Denominated Bonds
In a sign of just how eager all foreigners are to piggy back on the US' premeditated destruction of the dollar, Germany has just issued $4 billion in three-year dollar denominated bonds. From Bloomberg:
Germany sold $4 billion of bonds in
its first dollar-denominated offering since 2005, according to a
person familiar with the transaction.The three-year issue broadens the nation’s sources of
funding at a time when it’s seeking to raise a record amount of
debt. The notes priced to yield 25 basis points below the
benchmark mid-swap rate, according to another person familiar
with the transaction who declined to be identified.The issue was underwritten by Bank of America Corp.,
Citigroup Inc., Deutsche Bank AG and HSBC Holdings Plc.
And the reason why everyone is now hell bent on issuing debt in the world's choice for the next carry trade currency:
“There’s a lot of demand for it,” said David Keeble, head
of fixed-income strategy in London at Calyon, the investment
banking arm of Credit Agricole SA. “It seems to be cheaper for
Germany to issue in dollars at these yield levels."
While it is no surprise that all the countries that engaged in massive stimulus reform will now be forced to issue hundred billions in dollars to fund soaring deficits, it is now just a matter of time before they all piggyback and start imitating the US Treasury. Bernanke has now given the green light to dollar-denominated debt destruction (at the expense of savers) and as more and more countries line up to issue dollar bonds, the only question is how long before investors realize there are alternatives to the upcoming trillions in US treasuries still in the pipeline. With the DXY at a year low and likely to continue dropping each day as the market goes higher on momo quant wet dreams, all those investors better spend whatever current income these bonds generate before the dollar is pounded into oblivion, and the full issue, in this case, is repaid with a brand new and crisp $4 billion dollar note in three short years.
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Pffft. 4 billion? You call that a bond issue? Pathetic. Let me know when they decide to get serious about debt.
Pathetic, perhaps in quantity. Shrewd if you ask me - Let me take something of yours that has value now, in return for crap later and I'm not the "bad guy" for making it crap.
If they lose out and the dollar gains value the bad guy is the Fed that likely tightened policy (not in interest rates but probably in derivatives) and if they win and the dollar loses value then the Fed is the bad guy as well.
Either way this is just another way to hide/pass the risk and blame around like a hot potato.
I heard that 2 Japs were caught with a $4 billion bearer bond riding into BFE in a boxcar full of day working Baboons.
Are you sure it wasn't Don Johnson and his faithful sidekick Cheech?????
With the whole world betting against the dollar - and the whole world trying to devalue their currencies as well, I'm very tempted to make long dollar bets going forward. I've got a serious problem believing the German and Chinese governments can be right.
the term "crowded trade" is redefined each day in this absurd world of finance.
Aren't the Germans and the Chinese on opposite sides here? In China's case they are buying dollar denominated bonds; in Germany's they are selling.
That's wonderful carry! If you are going to burry yourself in debt, do so in a currency about to collapse! It's even better than spurring inflation to devalue your debt and clean up your balance sheet. Plus in case we don't have enoguh sovereign supply from the US Treasuries, it gives investors craving a low yield bond backed bya different kind of failed economy!
Absofuckinglutely.
Precisely, coupled with my point above I think they factored in the following processes in their decision:
A) Choose an amount to test both market appetite.
B) Mark to a term on the paper that is pretty conservative they're not going to "get taken to the woodshed".
It's now just a matter of when they do it again and how much...
Note to Tyler: put this on your list of things to watch and hopefully they're not doing the gross game-playing of participants like the Fed, from your timely posts this last weekend.
Who and why did the SPX just spiked up?????
HAHAHAHAHAHAHA OMFG! If anyone recognizes the potential for hyperinflationary currency collapse it is the Germans, having experienced this twice in the past 100 years. This is too goddamned funny!
+1000.
Can I get a WTF?
If a lot of countries are required to acquire dollars to pay the interest and principle on dollar denominated bonds, won't it push the dollar up?
After all, they can't just print more dollars to pay off their debt like the US can
Galbraith: Government Spending Is the Solution, Not the Problem.
It's official, Galbraith in now the dumbest in the world.
If you're an export driven economy you can't let the USD devalue too much relative to your currency or you'll have serious issues.
Short fiat, long hard assets.
The only way they make it cheaper by issuing in $ is for the $ to decline over the next three years. A 30 bps advantage in yield is no bargin versus the currency risk. You have to believe the currency is going to fall or you need $$ very badly.
The "spike" in the market is from the wolves spiting at Obama for threatening them in his speech. Obama realizes that the Obium dose is going too FAR and telling the wolves to get back into their sheep clothing. Aint gonna happen with Ben & Tim at the Fed's wheel. Meanwhile the dollar weakness is another temporary shell game that Wall St. is playing getting currency players to buy into Euros & Yens. I am not a believer in the dollar collapse until I see lasting appreciation in EM currencies of India, Mexico, Poland et al.
"I know nothing–NOTHING!" : http://jessescrossroadscafe.blogspot.com/2009/09/it-has-now-become-clear...
is there any bounce back for the dollar?
Wow this is totally out of left field. It is also a big gamble.
If the economy does not show any non-gov't green shoots, the dollar can still strengthen like crazy due to deflation of assets and debt.
It just seems like a risky bet to place. Anybody who can say for sure where the dollar will be in exactly one year from now is probably wrong.
I am with you 100%. Everyone wants to be short dollars.
I'd like to sell $4 billion of charmin toilet paper and buy it back for nothing after everone wipes their behinds with it
They better hope the dollar doesn't reverse for some reason.... Oh wait... all this debt in dollars and nobody has dollars coming in.... Hrmmmm, what happens if the bank calls back the loan and you can't refinance? Oh... you're fucked. Woops.
It' a little bit more complicated than that. They bought an insurance against the currency risk:
http://www.handelsblatt.com/finanzen/anleihen/deutschland-leiht-sich-gel...
(sorry, link is in german). The funny thing is, that they might have bought the insurance from Deutsche Bank - the article doesn't specify who the insurer is. But that way Deutsche Bank would insure bonds of the german government which in turn would bail out Deutsche Bank (if their bets went wrong). Great.
Crazy stuff.
Germans love bonds...and David Hasselhoff.
I suggest we refer to these as Hasselhoff bonds.
Hey, im from germany and i hate David Hasselhoff, as any other normal german does.
BTW: This is the fuckin best Blog i have ever seen! Thx for the information! Lets bust all of these fuckin gamblers and thieves.
Just more crowding out of the US credit markets to bring economic collapse and the end of US industry. The end will be destruction of US debt either by default or inflation.
The Fed is taking this to its logical conclusion - taking care of debt through inflation and debasement of the currency. Bernanke thinks that he is the genius who can avoid the fate that has befallen every country that has tried this way of getting out of debt. Fed is going to destroy the dollar. This is the new US - punish the savers and the responsible people so that idiots and profligates are rewarded for their idiocy. Wonderful incentives. Bernanke, get your head out of your ass, put your ego aside - the FX market is telling you what you need to know.
This is actually a brilliant hedge on what will happen to the export industry if the dollar collapses. All that dollar-zone buying will head towards zero. But borrowing in dollars cancels out the effect and gives the government fuel to bail out the effected industries. If this goes well I see the Germans scaling up the operation.
I'm virtually certain they swapped it. This from Bloomberg, "The German spread “is a fair price for investors,” while the government “is saving taxpayers about 10 basis points compared with a possible issue in euros,”
Tells me they did the currency swap and removed the currency risk. Also, Spain and Belgium did the same trade last week with the same goal in mind.