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Every German Bund Will Soon Trade At -0.20%, Citigroup Predicts
The ECB’s move to restrict PSPP purchases to sovereign bonds with yields at or above the deposit facility rate has far reaching implications for the German bund curve, Citi notes. Specifically, Citi says bunds will be bought until yields converge on -0.20bps.
From Citi:
The -20bp rule means that the Bundesbank and other core NCBs will be buying higher duration paper than other markets such as Italy.
It also means that the Buba will have to buy very close to the 25% issue limit in all remaining paper, assuming no change in market value.
The ECB may then have to drop the 25% limit for some issuers and perhaps all – which in practice means that NCBs can buy more of Non-CAC bonds.
In other words, by virtue of the fact that a larger percentage of periphery bonds trade with a yield above the -0.20bps threshold (compared to Germany), Bundesbank purchases will skew towards longer-dated paper by comparison. Additionally, the yield floor may make it difficult for Germany to hit asset purchase targets while remaining under the 25% issue cap.
The key takeaway however, is this:
We think that the buying restriction means that large parts of the German curve converge towards -20bp.
To be clear – we are indeed saying that -20bp is a yield target now that will gradually extend along the curve. Both the Bundesbank and private investors are expected to motivate a more concentrated buying squeeze.
* * *
In sum, yields on shorter-dated German paper will move up to the deposit facility threshold and with the 10-year yield sitting below 40bps, it won’t be long before the entire curve flattens at -0.20bps.
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Can't wait for negative rate mortgages... /sarc
Inverted. Lots of americans do this. get a house with 0 down, free food, free phone, free utilities, ebt cash money. getting paid to breath/breed
And when they run outta negative rate Bunds, they'll be buying US Treasuries.
Shit's a global interconnected world.
About time for Bulltard to say something stupid
Those German Bunds are tight.
They must work out.
pods
And it's a winning trade as long as you don't mind the neighborhood.
/s
DAMN, I love central planning! You'd have to be one dumb bunny not to figure out how to front run THAT "roadmap to wealth".
Bonds have never been my thing, but the singularity approacheth.
German retirees and pensioners are going to get ass raped is what this means.
When word spreads that retirment funds are not guaranteed, their government will have a huge problem on their hands.
They could have allowed to let Greece go but NEIN, NEIN, NEIN... they wanted to turn Germany into Greece instead.
Expect German tax collections to drop significantly.
Why fucking bother anymore?
They aren't the only ones, Chicago looks like a real winner. Retirement is a recent invention but promises were made that won't be kept.....
Well said, but I think the currencies will go to hell first.
That seems to be where control is breaking down.
The cabal is hell bent on trying to maintain the US$ hegemony because their days are numbered.
This is their last hoopla, their last kick at the can. After this ride, they're dead anyway and could care less what happens after their departure. I've encountered so many guys like this who just couldn't give it up.
The resident German tax collector junked me... LOL
I am waiting for that mortgage that pays me back.....what a country we live in..
Instead of paying people to manage your houses and collect rent, you'll pay people to live in 'em.
Section 8 housing for White People?
Section 8W is for the white folks.
Presently 5 % of all section 8 funds go to white people, with 95 % to 'po hispanics (aka illegals) and black folk. Also, they get free daycare, free pre-school, welfare, EBT cards, free cellphones, cab allowance
(Uber ok) and, of course, free college.
You won't get a mortgage because you have a German minijob that pays 400€ a month
LOL!!! "winning"...
suckers...
Completely normal. Nothing strange here at all.
What would it take to be strange?
Even intervention by space aliens is "priced in."
You'd thnk that buyers would be front-running the ECB purchases, and my guess is that over the last few months they have been. But in a classic case of "buy the rumour, sell the news" Bund yields are higher over the last couple of days.
And the next time Citi is right will be the first time...
-20bps is not a "yield". It's a "take".