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Deposit Confiscation Fears Drive Bund Yields Negative For First Time This Year

Tyler Durden's picture


If you had a deposit greater than EUR100,000 in any peripheral European bank, where would you place it (assuming it was not already under some anti-European Union capital control)? It seems we have the answer - German 2Y Bund yields just went negative for the first time this year as investors and savers scurry for safety...



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Tue, 03/26/2013 - 12:28 | 3377468 Political_Savage
Political_Savage's picture

I admit it, I'm a idiot. I've always wondered how yields go negative. I've never understood the concept, but i'm sure it's easy. Anyone care to teach a man how to fish?

Tue, 03/26/2013 - 12:31 | 3377484 HulkHogan
HulkHogan's picture

Man, I can't fish either...

Tue, 03/26/2013 - 12:33 | 3377496 Stackers
Stackers's picture

Yeah, so do negative yield bonds come with a payment bill attached instead of coupon and you have to send them money every month ? How the hell does that work ?

Tue, 03/26/2013 - 12:36 | 3377507 HulkHogan
HulkHogan's picture

I'm waiting for car loans to go neg. They can pay me to drive around in a Prius.

Tue, 03/26/2013 - 12:42 | 3377551 scatterbrains
scatterbrains's picture

At some point Benny B is going have to pay folks to hold some of that SPY he keeps devouring.

Tue, 03/26/2013 - 13:26 | 3377759 SeverinSlade
SeverinSlade's picture

So just to recap: Russian oligarchs pulled their money out of Cyprus and opted to pay Germany (the very sovereign that demanded the confiscation of their private property) to hold their cash? 

Tue, 03/26/2013 - 13:27 | 3377782 HoofHearted
HoofHearted's picture

The idiots are the ones taking the negative yields. Some of us prefer to hold some barbarous relic that has no coupons attached...

Tue, 03/26/2013 - 13:42 | 3377837 Frozen IcQb
Frozen IcQb's picture

My best guess is that the drop in German yields are not Russian in origin. The EUR.RUB cross took a plunge last week where I suspect the cash got repatriated to Rubles. IMHO.


Tue, 03/26/2013 - 13:43 | 3377852 SeverinSlade
SeverinSlade's picture

You're probably right.

Tue, 03/26/2013 - 13:41 | 3377838 SeverinSlade
SeverinSlade's picture

"I'm waiting for car loans to go neg. They can pay me to drive around in a [fag-mobile]."

Fixed it for you.

Tue, 03/26/2013 - 12:37 | 3377517 LawsofPhysics
LawsofPhysics's picture

Wake me when BofA will pay me to take out a loan.  "winning"

Tue, 03/26/2013 - 12:44 | 3377564 flacon
flacon's picture

Cypriots have to PAY 40% of their deposits to the banks just to have the principal kept "safe". 

Tue, 03/26/2013 - 12:48 | 3377586 LawsofPhysics
LawsofPhysics's picture

That's my point, negative interest rates for them, not for you.  Roll the motherfucking guillotines already.  I wonder how many fees being supported by the theft of those savings?  Long all physical assets and sharecropping.

Tue, 03/26/2013 - 13:42 | 3377831 ILLILLILLI
ILLILLILLI's picture

I'm thinking about building a line of heavy-duty guillotines that can stand repeated use with a short duty-cycle.

In a nod to technology, there will be a upward facing display screen and webcam that lets the guest see their face AND, upon impact, it automatically posts an animated GIF of the event to their Facebook page. Of course the display will be rated NEMA4X so it can be hosed off prior to the next guest...

Tue, 03/26/2013 - 22:25 | 3380012 thisandthat
thisandthat's picture

Why waste good money on guillotines, when chainsaws work so well.

Tue, 03/26/2013 - 12:37 | 3377519 kaiserhoff
kaiserhoff's picture

You've never tried to sell a time share?

Tue, 03/26/2013 - 12:45 | 3377573 Cdad
Cdad's picture

That's the price of having the FED protect your big pile of cash...when the FDIC can no longer insure you because you are a whale  [aka you are J. Dimon].  Since you are not J. Dimon, you are left with said FDIC's promise to cover your deposits...which it does...until it doesn't [see Europe].   

Typically, you see whales lining up for the protection of negative interest rates when they know that the gig is up.  They will happily swallow negative interest rates if the government promises to protect their principle. Netflix, I guess? 


Tue, 03/26/2013 - 12:58 | 3377581 NoDebt
NoDebt's picture

The total you get back in coupon payments and face value at maturity is less than you paid for it on the open market in the first place.   Price and yield move opposite of eachother. 

Fer' instance, if you buy a 3% coupon bond at "100" (face value/par) you get the exact coupon rate.  If you buy it for 110 (at a 10% premium) you net LESS than the 3% coupon rate.  Pay high a high enough price for a bond and you can actually get to the point where your net return is NEGATIVE. 

All of this assumes you hold it to maturity.  If, however, you don't mind paying a premium because you think somebody else will pay an EVEN HIGHER PRICE THAN YOU DID.... well, then you're a bond trader, my man!


Tue, 03/26/2013 - 12:59 | 3377651 rubearish10
rubearish10's picture

Ben and Dud will always pay a higher premium!

Tue, 03/26/2013 - 13:10 | 3377691 maneco
maneco's picture

Basically if you buy a German 2yr note in the secondary market you'll be paying above par or 100. At maturity you will get 100 or par so you will lose on your principal and the tiny coupon that you are receiving will not cover that loss. That is how you get the negative yield despite receiving a coupon.

Tue, 03/26/2013 - 12:42 | 3377557 Stoploss
Stoploss's picture

                                                                              ** NOTE TO CENTRAL BANKERS **



Yall r fucked..

Tue, 03/26/2013 - 13:15 | 3377709 SpiceMustFlow
SpiceMustFlow's picture

What was once thought a physical impossibility, we now present the monstrous neg real rate bond in its natural habitat. Now what I'm gonna do is stick my thumb in the bond's cloaca, it'll really piss it off.

Tue, 03/26/2013 - 13:54 | 3377888 dtwn
dtwn's picture

Upvote for using cloaca and a financial term in the same sentence.

Tue, 03/26/2013 - 12:31 | 3377485 Schmuck Raker
Schmuck Raker's picture

If a bank account only offers a REAL return of -40%, a bond offering -1% looks pretty good. Assuming you don't know what 'gold' is.

Tue, 03/26/2013 - 12:40 | 3377543 Pareto
Pareto's picture

Excellent responses to our friend above.  And just because EVERYBODY at CNBC says the bond market is a bubble, is just another reason why 2's and 10's will fall below1%.

Tue, 03/26/2013 - 12:46 | 3377578 JPM Hater001
JPM Hater001's picture

Ok, I'll bite since we're confessing here...


What does "2's and 10's will fall" translate into in english?

Tue, 03/26/2013 - 12:53 | 3377615 outamyeffinway
outamyeffinway's picture

2 year, 10 year

Tue, 03/26/2013 - 12:54 | 3377618 Sophist Economicus
Sophist Economicus's picture

2 year and 10 year US bonds

Tue, 03/26/2013 - 12:55 | 3377626 LawsofPhysics
LawsofPhysics's picture

The U.S. treasury bond.  The ten-year has often been thought of as the benchmarket for capital costs.  The Federal Reserve Bank and their primary dealers have been the only significant players in that circle jerk for quite some time now.  These rates are supposed to represent the "true cost of capital".  Should that cost go up (i.e. the yields go above 2%) America defaults because the treasury won't be able to fund the current budget, much less the interest on the debt or the deficit).

Tue, 03/26/2013 - 13:56 | 3377896 dtwn
dtwn's picture

So will the US endgame become apparent when Gross/Pimco start selling their bonds?

Tue, 03/26/2013 - 14:34 | 3378086 LawsofPhysics
LawsofPhysics's picture

Please. Rates will never be allowed to rise and folks like PIMPCO are placeholders for 401k sheep.

Tue, 03/26/2013 - 12:55 | 3377629 Johnny Utah
Johnny Utah's picture

2's and 10's = yields on 2 year and 10 year gov bonds (probably US treas or German bunds) will fall below 1%.

Tue, 03/26/2013 - 12:42 | 3377554 kaiserhoff
kaiserhoff's picture

Exactly SR, and usually a sign of full blown depression, dead ahead.

Not so much hard money this time, as scared shitless money.

Tue, 03/26/2013 - 12:32 | 3377490 ar01
ar01's picture

Yield is a function of price, Basically the price of the 2Y Bund has gotten so high that, while you still get a coupon payment, you are paying above par for the bond. It's basically like paying $105 to get $100 back, so the net yield is negative. 

Tue, 03/26/2013 - 12:39 | 3377535 Political_Savage
Political_Savage's picture

Thanks - that makes sense.

Tue, 03/26/2013 - 12:43 | 3377561 Political_Savage
Political_Savage's picture

As a follow up, is that when a bond is trading "special" in repo?

Tue, 03/26/2013 - 12:44 | 3377563 smlbizman
smlbizman's picture

my guy calls it vig....

Tue, 03/26/2013 - 12:59 | 3377647 rufusbird
rufusbird's picture

Put in to dollar terms, it would be similar to buying a one year treasury bill that matures in a year at $10,000 for $10,006.00

Not a bad deal considering some other alternatives. You could make a profit if yelds go even more negative. Say to

-0.01 percent would sell for $10,010. At minus one percent it would be worth $10,100.

Considering the safety and liquidity issues. It is not illogical for some to consider. Like if you are parked in a southern E. Bank!

Of course there are better things around. A reallignment is occuring in which it will be more favourable to be a bond holder in a banks than a big depositor.



Tue, 03/26/2013 - 13:24 | 3377754 ejmoosa
ejmoosa's picture

Calculate REAL inflation and your yield is even worse more negative.

Now that is some shrewd money management.

What sort of salaries are being earned by those that think this is smart investing?


Tue, 03/26/2013 - 14:35 | 3378087 LawsofPhysics
LawsofPhysics's picture

Better get Bill Gross on the line.  

Tue, 03/26/2013 - 12:33 | 3377491 Quinvarius
Quinvarius's picture

A bank that hold Bunds needs a lot of money.  So the ECB bids them up to a stupid level, allowing the bank to sell for a profit--Or some other mutation of that scenerio.

Tue, 03/26/2013 - 12:38 | 3377509 Mark Urbo
Mark Urbo's picture



Old Version:

Give a man a fish and he will eat for a day.

Teach a man to fish and he will eat for a lifetime.


Updated Version:

Give a man a welfare check, a free Obama phone with unlimited minutes, free internet, cash for his clunker, a Chevy Volt, food stamps via EBT card, free housing, free contraceptives, free healthcare & medicaid, ninety-nine weeks of unemployment, free medicine, forgive his student loans and give him an honorary degree for just trying, buy his “art”, give him a living wage, and show him where to go so the nanny state can wipe his a$$ for him when it comes to any personal responsibility…

..and he will vote Democratic the rest of his life…              ..even after he's dead.



Tue, 03/26/2013 - 12:40 | 3377536 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Someone still has to pay for it...

Tue, 03/26/2013 - 12:50 | 3377600 Dumpster Fire
Dumpster Fire's picture

They just haven't been born yet.

Tue, 03/26/2013 - 12:52 | 3377609 ParkAveFlasher
ParkAveFlasher's picture

I know plenty of Republicans who are absolutely parasites of the state.

Tue, 03/26/2013 - 12:40 | 3377540 YHC-FTSE
YHC-FTSE's picture

We've done the twilight zone explanation of a debt that pays for itself. It seems to be the fashion these days. I think Bruce Krasting did an article about Swiss bonds last year on the same theme, but don't ask me to find the link - I have enough problems typing on a tiny phone screen using predictive text that keeps on swearing at me.

Tue, 03/26/2013 - 12:48 | 3377584 Johnny Utah
Johnny Utah's picture

Say someone buys a 1 year zero coupon bond for $1,000 and it yields 5%. At the end of the year, the payment the investor receives is $1,050. If they turn around and sell you the same bond for $1,100, you now have a negative yield. Bonds can have a negative "real" rate after adjusting for inflation too, but if we did that, all bonds would have a negative yield and this would be a non story ;) happy hunting!
~ Johnny Utah
Ohio State Buckeyes All-Conference

Tue, 03/26/2013 - 13:03 | 3377665 firstdivision
firstdivision's picture

Simple, the rate you're receiving minus CB inflation rate.

Tue, 03/26/2013 - 13:17 | 3377715 Clayton Bigsby
Clayton Bigsby's picture

Since yields and prices move inversely to one another (think see-saw - one goes up, the other goes down), in flight for safety, prices get bid up so high by people scrambling for the same assets, that it actually pushes the yield negative....

Tue, 03/26/2013 - 12:27 | 3377469 spastic_colon
spastic_colon's picture

who cares as long as equities close green for the quarter /s

Tue, 03/26/2013 - 12:28 | 3377474 Schmuck Raker
Schmuck Raker's picture

Scurry Bitchez

Tue, 03/26/2013 - 12:48 | 3377588 Renewable Life
Renewable Life's picture

This deposit confiscation shit is a game changer, these bitchez think they have somehow crushed human nature into obedience, that people will put up with this legalized theft shit forever! Read your fucking history books Eurocrats!!!!! You see anything in that book, that indicates you can get away with this shit without revolution, war, and fascism being the end product????

Tue, 03/26/2013 - 14:59 | 3378202 Vince Clortho
Vince Clortho's picture

Cyprus is a test.  They picked a small out-of-the-way country to run the test to gauge the response.

The test is not yet complete, but so far the results have been encouraging.  No pitchforks in the streets; no revolution.  If they are able to smooth this over, it will be repeated again in a different, larger venue.

Remember to look at the big picture.  Ultimately they are planning world domination for a small elite, ruling over a serf class of a couple billion workers.  You cannot get there from here in one step.  The change would be too noticeable.

Consult the directions for boiling the frog, or eating an elephant.

Tue, 03/26/2013 - 12:30 | 3377475 Cdad
Cdad's picture

So the bund implies that the value of the S&P is only 134 above where it should be.  Understood.

Tue, 03/26/2013 - 12:31 | 3377482 Beam Me Up Scotty
Beam Me Up Scotty's picture

The space shuttle Challenger continued to climb for awhile after it blew up too.  Did we see the explosion but we just haven't started to see the decent yet?

Tue, 03/26/2013 - 12:30 | 3377479 Super Broccoli
Super Broccoli's picture

"periferical" ???? are you assuming northern european banks are safer ?

Tue, 03/26/2013 - 12:31 | 3377483 Glass Seagull
Glass Seagull's picture



There you have it:  the newfound 'bid' for sovereign debt.  The can just found a new foot to kick it.



Tue, 03/26/2013 - 12:32 | 3377486 Beam Me Up Scotty
Beam Me Up Scotty's picture

Now I understand where the saying "keep your money hidden in your matress" came from.

Tue, 03/26/2013 - 12:33 | 3377492 Cone of Silence
Cone of Silence's picture

They go negative when there is fear.  And just think, somebody was able to get out of their zero interest rate position with a profit. 

Tue, 03/26/2013 - 13:32 | 3377800 ejmoosa
ejmoosa's picture

Yes, they are saying they would rather lose a little with a bond than a lot with a bank account.

I get it.

But when those are the ONLY two options they see, you know the system is FUBAH.

And whoever came up with that acronym, I salute you.

Tue, 03/26/2013 - 12:35 | 3377497 Belrev
Belrev's picture

Bund confiscation scheme next?


Oh wait .... This is what negative yield means!!!

Tue, 03/26/2013 - 12:34 | 3377498 sudzee
sudzee's picture

Haircut and a shave only 50 cents.

Tue, 03/26/2013 - 12:35 | 3377502 thewayitis
thewayitis's picture

 I'm in Europe and NO bank gets any more than enough to pay for monthly bills. Fuck em all. Thieves....Your imagination


 to where the rest of my $$ goes ......

Tue, 03/26/2013 - 12:36 | 3377503 ziggy59
ziggy59's picture

Release the Bundken!!

Tue, 03/26/2013 - 12:36 | 3377510 morning
morning's picture

Schatzie pays their debt service.

Tue, 03/26/2013 - 12:37 | 3377514 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Short government bonds bitchez. Where are the vigilantes to put even more pressure on the German bonds right about now?

Tue, 03/26/2013 - 13:11 | 3377692 LawsofPhysics
LawsofPhysics's picture

Right, the CB will simply print more to keep a bid under this shit.  Get physical, go long sharecropping and a dependable tribe.  History is very clear on where this is all heading.

Tue, 03/26/2013 - 12:37 | 3377518 MFLTucson
MFLTucson's picture

Perfect!  They got the fools to buy the bonds that no one else wants.

Tue, 03/26/2013 - 12:37 | 3377520 ziggy59
ziggy59's picture

Im feeling in the mood for some Bundt cake, myself

Tue, 03/26/2013 - 12:39 | 3377527 Son of Loki
Son of Loki's picture

Run, Forest, Run !

Tue, 03/26/2013 - 12:40 | 3377531 NoWayJose
NoWayJose's picture

Is this not what Germany really wanted - to have more deposits in its own banks, an even cheaper Euro, and even cheaper rates on its Bunds?

Tue, 03/26/2013 - 12:41 | 3377546 Yen Cross
Yen Cross's picture

      I would love to meet the fools that bought these bonds earlier.

   06:10       EUR             Italian 6-Month BOT Auction     0.831%           1.237%   Oh, wait we already know. The same fools that printed and sold them.

Tue, 03/26/2013 - 12:42 | 3377553 Duke Dog
Duke Dog's picture

LOL, might be wise to get your +/- 1% haircut up front, rather than a 40 -100% haircut later. Of course, those 2 year bonds may become 50 year bonds at some point without any input from you - now that would be funny:)

Tue, 03/26/2013 - 12:46 | 3377580 Son of Loki
Son of Loki's picture

"All your bonds belong to us...."....he he he....


"Unless you hold it, you don't own it."

Tue, 03/26/2013 - 12:47 | 3377582 Mr. Hudson
Mr. Hudson's picture

The Dollar will be King!

Tue, 03/26/2013 - 13:01 | 3377658 ziggy59
ziggy59's picture

.. then theres Burger King

Tue, 03/26/2013 - 12:48 | 3377583 Winston Churchill
Winston Churchill's picture

Next up on the Vegas show circuit;

Ben and Mario with their levitation act.

No wires, just hot air.

Tue, 03/26/2013 - 12:49 | 3377591 SheepDog-One
SheepDog-One's picture

LOL OMFG this whole thing is going to blow up SO spectacularly one of these overnites! I just can't WAIT!! :D

Tue, 03/26/2013 - 12:52 | 3377608 Clowns on Acid
Clowns on Acid's picture

Swiss and Bund bonds yileds can go negative, but that is just the 1st step in the liquidation out of cash in banks.

PMs have no yield, or perhaps a slighjtly negative yield if one factors in storage costs. Or factors in security costs if one keeps the PMs close.

2nd step is figuring out how one can buy and store PMs at an efficient price in Europe. Who would want a bond with negative yield for very long...with stagflation looming around the corner ?

Ok...maybe a bit of well.

Tue, 03/26/2013 - 13:11 | 3377696 HurricaneSeason
HurricaneSeason's picture

Negative Nominal Interest Rates (NNIR) are what will turn the world economy around and create sustained growth.  People wont mind getting a NNIR if it means their money is safe and it promotes jobs by getting money to the job creators.  It will also increase home values and reduce government debt.

Tue, 03/26/2013 - 13:18 | 3377716 LawsofPhysics
LawsofPhysics's picture

You forgot your < sarc > flag.  Growth is not possible without an increase in the flux of available energy.  Unfortunately, the latter cannot be printed out of thin air.  I like you contradictions; money is not "safe" if it is being taken from you, which is exactly what a negative interest rate will do.

The capital and resource mis-allocation and mal-investment continues.

Tue, 03/26/2013 - 13:26 | 3377775 icanhasbailout
icanhasbailout's picture

if you had a cat avatar people would pick up that you were being sarcastic right away

Tue, 03/26/2013 - 13:34 | 3377809 yogibear
yogibear's picture

No public outrage so Wall Street and the banksters can take anything they want. 

Shear the sheeple.

Tue, 03/26/2013 - 13:53 | 3377883 Toronto Kid
Toronto Kid's picture

Teller at ScotiaMocatta said today they were out of gold Kruggerands, Pandas, Eagles, Buffalos. Gold Maples in stock and 1/4 oz Sovereigns still present in the vault.

Tue, 03/26/2013 - 14:16 | 3378000 straightershooter
straightershooter's picture

Negative Yield   Dumb, Better off buying gold and then bury go(l)d somewhere in the ground----at least no negative yield problem.... And in the worst situation, under any circumstances, no Euro Crats can plunder it.......  Don't be the Orthodox church in Cyp-ripe?!!!!!

Tue, 03/26/2013 - 14:20 | 3378016 FreeNewEnergy
FreeNewEnergy's picture

Ok, OK, I'm getting this image here, that money leaves all periphery banks, sooooooo... what about all that Basel III (I think that's the one), that the banks are supposed to have X percentage of tier one capital? Uh, is that why the Eu said, well, move those requirements back a few years.

OK. Then these banks, without sufficient capital in them when the bank runs begin, go under... hard. Bank holidays across all of Southern Europe. Capital controls: only able to withdraw 30 Eu per day, something like that. (there's great potential for black markets, i.e., I'll write you a check, Guido, you cash it and give me the money. I'll give you XX euros.)

So, massive bank runs, governments shitting their pants, bond yields heading to zero, the US 10-year goes below 1%, the 30 down below 2%, and I can move out of the foreclosed home I inherited and buy some squishy new place at something like 2.25% on a 30-year loan. Sounds like a plan to me, unless my friends at Bank of America forget to proceed on that foreclosure, like they have for the past 3 years.

One nice feature of this nearly-100-year-old home, it's huge, with lots of places to hide cash and shiny things. No mortgage and - I love this part - the bank, being that they foreclosed, are responsible for the ridiculous NY state real property taxes. They've already ponied up over $15k, and that's on an $81K home. They were even so good as to pay the interest on the back taxes, and, twice a year, I get a letter from the govt. that the taxes have been paid, even though I never get a bill any more, that goes directly to the bank. Man, those guys at the bank sure are smart.

Life can't really get much better, or, maybe a real depression will end up making my extended pre-retirement even better!!!! (Four exclamation marks in honor of the Mogambo Guru.)

Party on. Bund-a, bund-a!

Tue, 03/26/2013 - 14:27 | 3378046 FreeNewEnergy
FreeNewEnergy's picture

OT: Just for the laughs, Fannie mae just listed this beauty for $3000 in Rochester, NY (my homie townie).

Just look at the pics and read the description. LMAO

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