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30-Year Bund Yield Hits Record Low As Curve Flattens
Last week we noted that the ECB’s decision to effectively put a floor under EMU sovereign spreads by restricting PSPP asset purchases to paper with yields above the deposit rate would likely have the effect of flattening the German bund curve as yields across maturities converge on -0.20:
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.
Two days into ECB asset purchases and we’re fast approaching a flat curve. From Bloomberg:
- GERMAN 2/30Y YIELD SPREAD BELOW 100 BPS, 1ST TIME SINCE 2008
- GERMAN 30-YEAR BUND YIELD DROPS BELOW 0.75% FOR FIRST TIME
- 10Y yield hits record low of 0.246% as benchmark 2Y, 5Y and 30Y yields also hit all-time troughs with curve bull-flattening
- 10/30 drops as much as 7bps to 51bps, flattest since 2012
...and as Citi notes, we may begin to see a similar scenario play out in other core countries’ debt...
The fact NCBs will not buy below -20bp (and may show caution at negative rates near -20bp) leaves open the room for spread compression to -20bp by front/intermediate core and semi-core paper.
... and here's a visual:
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Larry Kudlow is gonna be shitting himself that we're losing our "beautiful upward sloping yield curve".
Below 2% is a joke. Below 1% is insanity
Keep going....
That is a whole lot of people thinking they will be the first to the exits. They all know long term it is insanity.
Hey sailor, wanna have a good time????
This is seriously warping my brain. I have zero idea how this can be happening. How can you pay someone to hold electronic fiat?
time to execute plan A: raise avacados in Argentina. Who's in?
Germany might have a 4% growth this year...and with a 0% bond rate..they will make a large surplus...not bad......that should piss off Greece Communists....I still think Germany will leave the Euro first..
are you kidding that would be like Wall Street and Washington,DC leaving the USA. Germany is killing it....where do you think their money comes from...making stuff for their poor cousins? Germany hasn't had a history of not wanting to dominate Europe!
Germany will stay in till Europe starts really falling apart. I figured that they would be the first but now I'm thinking they want to collapse the EU so bad that they automatically control the continent. Hitler was an amateur.
New Germany gets New Super-stong DMark. Bye bye exports and payback for years of subsidy...
money stop moving, system dead
With this huge amount of money flowing into long-term negative interest rate bonds, doesn't that indicate abject fear?
No! The masters of universe are the smartest people of the planet. Maybe they are all ex-enron employees or something! Corzine was positive he wouldn't destroy MF Global and Dick Fuld was absolute sure Lehman would survive!
once the snake buys up all the bonds they issue then what? The system eating it self to pay off the richest....doesn't sound like smart plan. The Japanese have been trying to show everyone it doesn't work for 3 decades....no one believes them!
How is the World not buying Gold ??? And how can I be so right, yet so wrong (so far)
It is amazing how gold and silver are being left out of this boom....we are the black sheep...
better to be wrong, wrong, wrong, and then right versus...
There is no such thing as cash, only higher and lower grades of debt. Sovereign debt is the actual cash in the system, the market is determining how long of a duration will qualify. In the US we have a lower grade credit system (the size of our economy) which is pyramided on an equal size of sovereign debt; in Europe their private credit system is pyramided on the equivalent which is 10% of the economy, the credit is all pyramided off of German debt. Their is very little of "True Sovereign Debt" in Europe in relation to the size of the economy, so it is very highly valued.
We have negative yields outside of panic conditions... that is really saying something. The world has proven it cannot de-lever outside of panic conditions, it has proven that time and time again, so panic it must be. Should be quite a sight to see sometime in the next 1-5 years.
The dumb fucks are in the process of discovering another way to produce an inverted yield curve with the short rate at zero.