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The Greatest Depression? German Yields Now Negative Through 2017

Tyler Durden's picture


Another night, another sell-side bank suggests European QE must be getting closer and, along with more un-de-escalation in Russia-Ukraine, the bid for German bonds continues to surge as Europe's greater depression appears increasingly priced into bonds. Yields on all German bonds out to 3 years are now negative and 10Y Bunds have collapsed to 90.5bps - record lows. This in turn - as we explained here - is dragging Treasury yields lower (10Y 2.36%) but leaves the spread to Bunds at record highs.

Bund tests 90bps...


as the entire German yield curve is now negative out to 3 years...


Massively divergent from stocks...


and US Treasuries follow suit...


Charts: Bloomberg


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Wed, 08/27/2014 - 08:31 | 5148501 Sudden Debt
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If you give me 50 euro's now...


Wed, 08/27/2014 - 08:32 | 5148509 wallstreetapost...
wallstreetaposteriori's picture

Whoever is trying to front run the ECB is going to get smashed.... 

Wed, 08/27/2014 - 08:34 | 5148518 Sudden Debt
Sudden Debt's picture

European markets are going to look like the US markets in the next year so I'm thinking about going long on the Dax and Bel20.

PEeeeeeeeeeeeeeeee's X 1000 AND BEYOND!!!

Wed, 08/27/2014 - 08:37 | 5148523 GetZeeGold
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How is this not DOW 18K?

Wed, 08/27/2014 - 08:46 | 5148558 Haus-Targaryen
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If "super" Mario does expand the ECB's balance sheet via, among other things, sovereign debt purchases, I have a few questions;

1) How many decades into the future will Germany be paid to borrow money

2) What will the Germany government do with all its free money?

3) How will Draghi be able to turn off the spicket once the PIIGS+France get their annual budgets tied to too much demand for their debt?   

4) How long before savers realise that they get a better ROR via sticking they cash in the mattress than in the bank?  

Wed, 08/27/2014 - 08:53 | 5148585 Grande Tetons
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4) How long before savers realise that they get a better ROR via sticking they cash in the mattress than in the bank? 

If everything is yielding nada or negative....sock some of those zero yielding PMs in the ole mattress while you are at it. 

Wed, 08/27/2014 - 09:37 | 5148769 LawsofPhysics
LawsofPhysics's picture

one more time for clarity -->  If everything is yeilding nada or negative and the puchasing power of your money is being destroyed then you should be turning that fiat into any asset of real value and putting it in a matress, safe, or whatever the fuck you can defend and control.

Even physical cash might have more value when the capital controls hit in earnest, and we aren't even close yet.

Wed, 08/27/2014 - 08:53 | 5148583 Cattender
Cattender's picture

Zee says: How is the Dow (not) at 18,000? well, it is up to the Fed If it makes it or not... (Before the NEXT Collapse) i keep hearing that "it's Different THIS Time" (somehow)

Wed, 08/27/2014 - 08:56 | 5148593 Grande Tetons
Grande Tetons's picture

There is a March, 2000 smell in the air. Could be a collapse or the stench of dog shit.  Probably the latter. 

Wed, 08/27/2014 - 08:38 | 5148533 philipat
philipat's picture

So those UST's look like a real bargain? BUY BUY BUY. No, wait, The Fed needs to get folks OUT of UST's to free up collateral and to continue the equity ponzi. The race to the bottom continues. Expect MOAR QE......

Wed, 08/27/2014 - 09:03 | 5148630 BorisTheBlade
BorisTheBlade's picture

You got it right except for points stressed, it should read:


And if I ever give them back to you, then it will be 40, in 3 years time, provided you still want them since they all will be eaten by inflation. [EVIL LAUGHTER]

Wed, 08/27/2014 - 09:44 | 5148801 philipat
philipat's picture

Perhaps it should be, "I would gladly pay you next Tuesday for a Hamburger today"......?

Wed, 08/27/2014 - 08:31 | 5148504 NEOSERF
NEOSERF's picture


Wed, 08/27/2014 - 08:40 | 5148539 GetZeeGold
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Put me in coach.....I'm ready.

Wed, 08/27/2014 - 08:32 | 5148508 falak pema
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The big questions now are if the Euro goes into a prolonged downward spiral :

1° Does Draghi initiate QE bigtime. If he does what does Mutti say? 

2° Will the US "stocks on steroids" economy decouple with the German/UE "bonds on steroids" economy? 

If it does what does it do to the global economy and currency wars?

3° What will the USA then do in face of Russia/China monetary entente ?

Its all linked and there could be an awesome ripple effect.

Wed, 08/27/2014 - 08:40 | 5148531 LawsofPhysics
LawsofPhysics's picture

Full retard Falak, the rubicon was passed years ago, we are now committed to thinning the herd, whether we like it or not.  The liability side of the balance sheet is what it is and given the current state of technology, the calories available for consumption are what they are.  That which cannot be sustained won't be, it still doesn't mean you won't turn on the T.V. to hear all the talking heads going on about how good everything is.

Interesting times, good times, well, for us anyway.  FYI, it is pretty clear that China has an inside track on American politics and property.  They won't do anything to destroy their investments there or in Canada.  they eventually push all the Americans out as Chinese hire only other Chinese.

Wed, 08/27/2014 - 10:01 | 5148804 falak pema
falak pema's picture

who is WE? 

The US oligarchs may find that the Euro counterparts could get roasted in the next two years.

If the Euro Z /US econo-financial uncoupling occurs, as does the BRIC/first world in parallel, and cannot be CB controlled; then the "WE" will be in big financial trouble in terms of saving their wealth. 

The race to bottom as a result of unwind could be awesome and nobody can say who the new "WE" will be once we hit the floor.

I'm asking questions step by step, as I don't know where this "invisible" staircase leads and when the descent for the elites of first world core countries will begin.

The fight between these elitist thieves is still very much "behind the curtain of CB plays".

If the CBs fall out maybe that's the first sign of cracks within the system.

We can see the cracks without the system but those within...

To me the transfer of power, financial or otherwise, from US to China, will not just happen thru a handshake of Oligarchs in Davos.

Its more complicated than that. There will be blood. And nobody knows the scenario nor the end of that movie in the making. Herd thinning is a large concept.

Wed, 08/27/2014 - 10:11 | 5148921 LawsofPhysics
LawsofPhysics's picture

In my case, (and everyone's situation is different), the only "we" I care about is a farming co-op of mostly veterans and engineers.  We understand sacrifice and how to feed ourselves.

It is what it is... and chance always favors the prepared, period.

Wed, 08/27/2014 - 08:33 | 5148514 LawsofPhysics
LawsofPhysics's picture

But, but, but "rates are going up"...


It's the running joke around here these days.

Wed, 08/27/2014 - 09:44 | 5148803 Pool Shark
Pool Shark's picture




I remember a lot of down arrows last year when I suggested the US dollar would probably strengthen and bonds were a good buy. The only real surprise has been that I expected equities to have tanked by now. Eventually, the divergence in those charts above between stocks and bonds will close. I expect it to come from a crash in equities. If so, that could push bonds even higher.

[Sitting happily in Cash/Bonds/Gold,,, waiting for the deflationary collapse. We are Japan...]


Wed, 08/27/2014 - 08:33 | 5148517 orangegeek
orangegeek's picture


Wed, 08/27/2014 - 08:35 | 5148521 craus
craus's picture

In 2011 European Bond yields used to shock the markets here.
Especially German bonds yields at negative rate, WTF.
But all this does now is give rocket fuel to goto all time highs over here.
Sigh, I just hope the market dips so I can BTFD.


Wed, 08/27/2014 - 08:40 | 5148537 yogibear
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The money goes where it earns  the most. 

Wed, 08/27/2014 - 09:06 | 5148550 GetZeeGold
GetZeeGold's picture



There you go again Yogi.......common sense will get you nowhere.


Don't you dare try to move to Canada........we WILL find you.


We'll sick the half-breed Senator from Mass on you.

Wed, 08/27/2014 - 09:05 | 5148643 LawsofPhysics
LawsofPhysics's picture

Define "money".  I'd argue that talent and capital always go where they are respected.  That's what really matters, regardless of the "fiat du jour".

Wed, 08/27/2014 - 09:43 | 5148792 andrewp111
andrewp111's picture

Sometimes, return of capital is more important than return on capital.

Wed, 08/27/2014 - 08:43 | 5148549 youngman
youngman's picture

For a Country that went thru a period of Hyperinflation...this is a little strange....

Wed, 08/27/2014 - 08:51 | 5148577 Sandmann
Sandmann's picture

which country ? Hungary ? Poland ? Argentina ? Germany ? I mean Germany's problem was caused by France and Belgium invading iand occupying in 1923

Wed, 08/27/2014 - 10:43 | 5149044 piratepiet
piratepiet's picture

How did France and Belgium occupuying Germany ( Ruhr ? ) cause hyperinflation ?

Wed, 08/27/2014 - 12:32 | 5149572 Quaderratic Probing
Quaderratic Probing's picture

Hyper deflation is worse the 1% lose net worth on real assets. So yes in the end the Germans will print to stop it. The past rhymes. Because the printing counters deflation gold will not increase in value, in fact its one of the real assets falling they try to save ( because they bought gold thinking inflation was the problem ).

I expect down votes.

QE covered deflating off book CDOs for the very reason above

Wed, 08/27/2014 - 08:43 | 5148552 venturen
venturen's picture

WTF they just need to print 10 Trillion Euros and all will be great just like here /SARC

Wed, 08/27/2014 - 08:45 | 5148556 youngman
youngman's picture

They will...just wait..

Wed, 08/27/2014 - 08:45 | 5148555 curbyourrisk
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It's all design.


The only way rates could possibly go higher in the US (or at least talk about going higher) is if QE is finally practiced in the EU.  The FED has been trying to force their hand for some time.  All those pics of EU leaders in bed are finally paying off as they are now finding it necessary to play ball and continue the USA directive of stealing every dime, euro, krona, lira of the citizens.

Wed, 08/27/2014 - 08:46 | 5148559 Brazen Heist
Brazen Heist's picture

Negative yields mean that bond prices are being bid up and selling at premium above par, due to increased demand from investors. The maket is expecting inflation in the future from debt monetization aka asset purchases, that's what the neg yields suggest. Inflation expectations are being priced into bunds. 

Now European banks can help pump stocks with all MOAR QE money. To the moon!!!

Wed, 08/27/2014 - 09:27 | 5148683 Dr. Engali
Dr. Engali's picture

Wrong. If inflation expectations were being priced into bonds then they would be selling off and yields would be going higher. Bonds are pricing in: 1) depression and therefore deflation 2) bond purchases from the ECB and 3) More global turmoils and possibly moar war. 

Wed, 08/27/2014 - 09:32 | 5148746 Brazen Heist
Brazen Heist's picture

I still have some learning to do on my bonds...

Deflation until 2017? 

Sounds like I will be enjoying more cheap European trips till then. 

And look at that those cheap southern/eastern European property markets that are still crashing! Just not too sure if the rent will be denominated in euros by then.

Wed, 08/27/2014 - 09:40 | 5148781 LawsofPhysics
LawsofPhysics's picture

soveriegn bonds are also used as "high quality" collateral.  Take a look at the REPO and reverse REPO "markets".  we are fucked.

Wed, 08/27/2014 - 09:41 | 5148784 andrewp111
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If you had a billion Euros that you had to store somewhere, and keep liquidity, where would you put them?  What are the alternatives to Bunds? Think about it in this way, and it is easy to see why Bunds have a slightly negative rate.

Wed, 08/27/2014 - 09:53 | 5148838 Brazen Heist
Brazen Heist's picture

I would probably park them in....bunds. The safest euro instrument at the moment. 

Wed, 08/27/2014 - 12:20 | 5149494 Quaderratic Probing
Quaderratic Probing's picture

Bonds sell when new bonds have higher rates not before. Direct relationship.

Wed, 08/27/2014 - 13:54 | 5150017 Dr. Engali
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Higher rates are never offered unless the market demands it. No entity is going to offer 4% if the market will accept 3.5%. The market forces rates higher by rejecting the current offer. Right now the market can't do that because the central banks are distorting what's left of the market. 

Wed, 08/27/2014 - 17:05 | 5151211 Quaderratic Probing
Quaderratic Probing's picture

Germans will buy US bonds for higher rate return

Wed, 08/27/2014 - 08:47 | 5148563 Downtoolong
Downtoolong's picture

Yields on all German bonds out to 3 years are now negative

So many elephants in the room now you can’t even ignore their shadows, let alone them.

And what’s that smell?

Wed, 08/27/2014 - 08:53 | 5148580 ejmoosa
ejmoosa's picture

The cost of money is less than zero.  That's the long term forecast of what it's gonna be worth.

It's time to pull your assets out of the banks and into something you can have physical control over.

Wed, 08/27/2014 - 08:59 | 5148603 AdvancingTime
AdvancingTime's picture

I contend the primary reason that inflation has not raised its ugly head or become a major economic issue is because we are pouring such a large  percentage of wealth into intangible products or goods. If faith drops in these intangible "promises" and money suddenly flows into tangible goods seeking a safe haven inflation will soar. Like many of those who study the economy I worry about the massive debt being accumulated by governments and the rate that central banks have expanded the money supply.

The timetable on which economic events unfold is often quite uneven and this supports the possibility of an inflation scenario. A key issue being one of timing. If the price of gas jumps to $8 a gallon overnight do you buy gas and not make your car payment or stop driving the twenty miles to work? Answer, it could be months before your car is repossessed so you buy gas.

 It is important to remember that debts can go unpaid and promises be left unfilled. If this happens where does it  leave us? Chaos and major disruption would result from such a scenario. As we have seen from the economic crisis of 2008 and following many other unsettling developments legal actions can continue to drag on for years.  More in the article below.


Wed, 08/27/2014 - 10:56 | 5149101 MachoMan
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If faith drops in these intangible "promises" and money suddenly flows into tangible goods seeking a safe haven inflation will soar.  Like many of those who study the economy I worry about the massive debt being accumulated by governments and the rate that central banks have expanded the money supply.

These statements are inconsistent.  The latter infers that you know the definition of inflation, the former not so much.

Wed, 08/27/2014 - 11:55 | 5149379 Quaderratic Probing
Quaderratic Probing's picture

Already happened oil hit 140 gas 4 dollars and the world markets broke. Oil hit 35. Self limiting.

Wed, 08/27/2014 - 08:54 | 5148586 Youri Carma
Youri Carma's picture

btw US Generic Govt 10 Year Yield 2.36% Now

Wed, 08/27/2014 - 08:55 | 5148591 Brazen Heist
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Once the ECB loses its "independence" due to pressure from the French, Italians etc. the Germans won't be happy. 

I'd laugh if Germany is the FIRST one to exit the sinking ship that is the EU. 

Anything is possible, look at the world.

Wed, 08/27/2014 - 09:00 | 5148604 d edwards
d edwards's picture

Geez, Germany was about the only EU country with a functioning economy. It's really grim now!

Wed, 08/27/2014 - 09:03 | 5148635 LawsofPhysics
LawsofPhysics's picture
Deutsche Marks for oil?  Interesting concept, what does Putin think of that?
Wed, 08/27/2014 - 09:12 | 5148661 Brazen Heist
Brazen Heist's picture

All the EU/US have to do is keep doing what they are currently doing, and the geopolitical ground will shift beneath their feet before they can say "exceptional!" Turkey, Brazil, India, Russia, China are already shifting, hedging and diversifying away. Germany smells the rats too, I suspect. 

Wed, 08/27/2014 - 09:21 | 5148708 LawsofPhysics
LawsofPhysics's picture

Many people do not realize how much oil is exported by the south american countires.  Just imagine what would happen if the people in these countries decided to use those calories to improve the lives of their own people instead of sending that oil to American refineires?

Wed, 08/27/2014 - 09:33 | 5148754 youngman
youngman's picture

Here in Colombia we export about a million barrels a day....inbetween FARC bombings of the all goes to the USA...then we import the distilled product back in...gas and desiel....which has more value so we lose out on the deal...

Wed, 08/27/2014 - 09:39 | 5148774 LawsofPhysics
LawsofPhysics's picture

I travel to Brazil for business about twice per year.  Americans have no idea what poverty really is.

Wed, 08/27/2014 - 10:58 | 5149110 MachoMan
MachoMan's picture

Yes, but for some reason we're hell bent on experiencing it.

Wed, 08/27/2014 - 09:49 | 5148819 Brazen Heist
Brazen Heist's picture

Like Iran.....has world's 4th largest reserves (or something similar) and lacks refining capacity, has to exports it out for refining and imports refined product again.

The next step for the developing world is to invest in refining/drilling infrastructure so it doesn't need to reply on foreign companies signing 30 year PSAs any longer. 

Thu, 08/28/2014 - 18:06 | 5156056 piratepiet
piratepiet's picture



"so we lose out on the deal..."

That is what is called value added.  Or did you expect them to refine your oil for free ??

Wed, 08/27/2014 - 09:57 | 5148853 MalteseFalcon
MalteseFalcon's picture

"Just imagine what would happen if the people in these countries decided to use those calories to improve the lives of their own people instead of sending that oil to American refineires?"

I'm thinking military juntas, death squads, disappeared citizens, endless torture, you know, the usual playbook.

Wed, 08/27/2014 - 09:57 | 5148856 Perfecthedge
Perfecthedge's picture

I hope Germany exits then into ice cold water in the middle of the night and drowns!

Wed, 08/27/2014 - 10:53 | 5149081 Watson
Watson's picture

The chance of Germany exiting the EUR (but not the EU) is much greater than generally appreciated.

1. Merkel is very popular, but is known for her strong support of the EUR;
2. There are historical reasons why Germans only want to use a serious

So if the French (and others who are much less important) somehow manage to do things that obviously put the EUR at risk, for Germans it will come to a straight choice between 1. and 2.

And I think 2. will win and the DEM is back.

The argument that this will somehow destroy the German economy is nonsense, Germany coped with years of an ever-strengthening D-mark.
However, if Germany does pull out of the EUR-zone, the EUR-zone's credibility goes to zero - and that might be 'unfortunate' for the more precarious members like Spain, Portugal and Greece - military governments again?


Wed, 08/27/2014 - 12:59 | 5149705 Escapedgoat
Escapedgoat's picture

The same Fascist governments like Franco in Spain and the Colonels in Greece?? The Greek Colenels were treacherous on top with conniving with NATO, by not defending Cyprus.

Wed, 08/27/2014 - 11:28 | 5149264 malek
malek's picture

That train has left the station, empty. (Or it disintegrated into a heap of rust while waiting at the station, to use a more fitting metaphor.)

If Germany exits the EUR (not even the EU), all the loans German banks made to neighbor countries would need to be largely written off. Due to this all German banks would collapse.
Furthermore the export surplus would mostly disappear, which would make the slow implosion of the German Rentenkasse become painfully visible, leading to deficits in the German federal budget about the same ratio than the US'.

No German politician will go that way if it can be anyhow avoided (anyhow = with more deception and lies to its constituents.)

Wed, 08/27/2014 - 18:41 | 5151567 Watson
Watson's picture

The German banking system will be put under pressure, but IMO it will survive...and anyway if it needs recapitalisation the German state can afford it.

The export surplus will not disappear. It will certainly reduce (not least because of the damage a German move back to a DEM will cause to less credible Southern European states), but it is simply a fact that Germany ran huge surpluses when there was an ever-strengthening DEM.

No German politician...
AfD came from nothing in a few months and is only unrepresented because of the minimum 5% rule.
A repeat election where the central issue is France, etc., wanting to manage the EUR like the Old/New Franc would give Merkel a real problem as she is seen as very pro-EUR, and it has not been forgotten that German citizens were never given a vote over losing the DEM.


Wed, 08/27/2014 - 23:33 | 5152525 malek
malek's picture

 The German banking system will be put under pressure, but IMO it will survive

Sure, if you deactivate most accounting rules everything can survive.

The export surplus will not disappear.

That's why I wrote "mostly."

Yes AfD will make it into parliament next elections, but that will change nothing.
Merkel has learnt well from her mentor ("aussitzen") and as most Germans see nothing wrong with her (non-)approach...

Wed, 08/27/2014 - 08:57 | 5148597 AdvancingTime
AdvancingTime's picture

And when you get your money back it will be in the form of a worthless currency!

At some point the return on loaning money is simply not worth the risk!  It might soon become apparent the economic efficiency of credit is beginning to collapse and the additional money poured into the system coupled with lower rates can no longer drive the economy forward.  When this happens we are at the end game.

 Why do you want to loan money if most likely you will never be repaid or repaid with something that is totally worthless? When this happens the only safe place to store wealth will be in "tangible assets" and the only lenders will be those who print the money that nobody wants.

The collapse of credit can pose major problems such as what we saw when many sellers were forced to demand payment up front before shipping goods in 2008. More on this subject below.

Wed, 08/27/2014 - 09:21 | 5148703 FreeNewEnergy
FreeNewEnergy's picture

Could you please change your handle to "AdvancingSPAM" because that's all you do?

I don't know about the Tylers, but I hate spammers on my blogs. Seems you have some kind of immunity. Must be a really annoying twit.

Wed, 08/27/2014 - 09:40 | 5148779 NotApplicable
NotApplicable's picture

At least he takes the effort to put up a pertinent post with his links. So there's that.

Wed, 08/27/2014 - 09:57 | 5148851 Harry Dong
Harry Dong's picture

And he doesn't end it with bitchez

Wed, 08/27/2014 - 09:58 | 5148862 MalteseFalcon
MalteseFalcon's picture

You just did!

Wed, 08/27/2014 - 09:37 | 5148768 andrewp111
andrewp111's picture

If you have billions of Euros to store, where would you put them? A tiny negative rate seems to be an acceptable storage cost, considering the alternatives.

Wed, 08/27/2014 - 09:39 | 5148776 Catalonia
Catalonia's picture

Judgement comes and that right soon

Wed, 08/27/2014 - 12:32 | 5149569 Bunga Bunga
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