NIRP Panic: Over Half Of European 2-Year Bonds Trade At Record Negative Yields; Italy Paid To Issue Debt

Tyler Durden's picture

Last week it was Mario Draghi's promise that he would push European deposit rates even further into NIRP territory from their current -0.20% level, something which market not only believed but has already priced in and then some, pushing German 2Y yields to a record -0.35%...


... but then earlier today, as predicted here previously, in a panic response Sweden's Riksbank did the only thing it can do to halt the "money tsunami" that Draghi is unleashing as he makes money even more unwanted, by expanding its QE for the 4th time this year since it was unveiled in February in hopes of making the SEK even more worthless than the Euro.

In short, Europe has unleashed yet another monetary panic, and nowhere is it more visible than in what happened today across the short end of Europe's government curve.

As the table below shows, more than half of European sovereign issuers just saw the yield on their 2 Year Notes trade not only below zero, but hit never before seen negative yields!


This reminds us of a post we did in January when the impact of NIRP was first felt on Europe's bond market, and when we wrote that
"in the aftermath of the ECB's NIRP policy, and subsequently QE, an unprecedented €1.4 trillion in European debt with a maturity of more than 1 year traded down to subzero, as in negative, yields."

But what happens if one expands the Eurozone NIRP universe to include the debt of other countries including Japan, Denmark, Sweden, Switzerland and so on? Conveniently, JPM has done the analysis and finds that a mindblowing $3.6 trillion of government debt traded with a negative yield as recently as last week. This represents 16% of the JPM Global Government Bond Index, or in other words nearly a fifth of all global government debt is now trading with a negative yield, meaning investors pay sovereigns, using other people's money of course, for the privilege of buying their issuance!

Following this article, there was a brief hiatus and bond yields normalized briefly on hopes the ECB may tame deflation, however all of that fell apart over the past month, when negative rates - and yields - have returned with a vengeance, as well as expansions of QE and who knows what other surprises European banks will unveil in the coming days (keep a close eye on that Denmark peg which may be the next "Swiss Franc" depegging shocker).

But nothing shows just how insane it is getting than the story of Italy, which earlier today not only sold €6 billion in Bills due April 2016, but did so at negative yields. From Reuters:

Italy sold six-month bills at an average negative yield for the first time on Wednesday as the prospect of further monetary easing in the euro zone pushed investors to pay to hold Italian debt.


Italy sold 6 billion euros ($6.6 billion) in bills due in April 2016 at a yield of minus 0.055 percent, down from a 0.023 percent yield paid a month ago on the same maturity. 


Since then, the European Central Bank has indicated it could unleash new stimulus measures to shore up inflation as early as December, including possibly cutting its deposit rate further into negative territory.


The ECB's message pushed Italian yields below zero on maturities of up to two years on the secondary market.


The sharp fall in Italian borrowing costs since the easing of the euro zone debt crisis has brought welcome relief to the country's stretched public finances.

This was not the first time Italy was paid to issue debt: on Tuesday, Italy sold 1.75 billion euros of zero-coupon, two-year paper at a yield of minus 0.023 percent for the first time ever. The lowest yield paid at an auction of Italian bills had already fallen into negative territory in April, when six-month debt fetched a minimum yield of minus 0.011 percent.

We expect this to be only the beginning of Europe's (and soon the US') journey through the monetary twilight zone that is NIRP, as central banks around the globe no longer have any choice but to intervene any and every time there is even a modest 5% drawdown in risk assets, as we saw in September.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
aliki's picture

so basically everythings going according to plan

junction's picture

From ZIRP to NIRP to NWO overlords.  Fast work, Obama & Company!

hedgeless_horseman's picture



I remember when interest rate was an indicator of the issuer's risk, and not an indicator of the instrument's suitability as fractional-reserve collateral.

J S Bach's picture

We've all heard of anti-matter in physics.  NIRP is anti-banking in economics.

Dr. Engali's picture

Seriously, how does this madness continue on like this? It's as if the whole fucking world has gone insane. Maybe it's just me.

Groundhog Day's picture

Whats mad and insane is owning that barbaric relic in a 6000 year bubble that doesn't pay any interest  /sarc

xrxs's picture

0% is starting to look pretty attractive :)

Hitlery_4_Dictator's picture

The world has gone insane, end times dude. It's end times. 

rbg81's picture

Can't wait till Greece gets paid to issue debt.

BurningFuld's picture

I imagine the banks are just flipping these things for the they really don't give a shit what the rate is.

hedgeless_horseman's picture



Nope.  The reason they don't give a shit about the rate is that a soveriegn bond's greatest value is as (fractional-reserve) collateral.

desirdavenir's picture

the exact phrase:

The unprecedented amount of shadow money chasing "safe assets" explains one thing: why bond yields are where they are, and why the more bonds central banks issue, the lower yields will go. That is, of course, until the entire shadow world described above comes crashing down.

Bill of Rights's picture


Everyone being the fucken banks...

css1971's picture

They should be demanding large volumes of paper money instead.

Sudden Debt's picture

When a bankingcrisis happens, money may be confiscated but bonds and shares won't

Stocks are very risky then but bonds could rise in value and are locked and "safe" for a few years.

How the hell else do you secure a billion? Gold and silver won't do because of the volume.

hungrydweller's picture

I see how this clusterfuck works.  The ECB prints up Euros out of thin air and buys overpriced bonds from its member banks.  These banks then buy new bonds at negative rates from insolvent governments which results in them paying said governments a small amount knowing that the ECB will buy those bonds from them later at a profit.  Just a big transfer scheme from the ECB to insolvent governments while the member banks make a skim.  Hell, get rid of the facade of propriety and just send the cash directly to the insolvent governments without the middleman skim.

Bill of Rights's picture

Pretty much , but hey Bitches have to get paid.

BurningFuld's picture

Hey if they did that they couldn't scare you into spending your savings.

Kreditanstalt's picture

WTF?  Why don't the idiots just trade that paper money for gold?

BurningFuld's picture

I know I know. Waves hand in the air. There is not enough gold in this planetary system at the current price?  Am I right?

taopraxis's picture
taopraxis (not verified) Oct 28, 2015 12:10 PM

NIRP is the central banks' swan song...

This gambit will fail within a year. People do not risk capital for negative returns. At some point, someone is going to take the money and run and the sovereign bond pyramid will implode. After the markets crash, inflation will skyrocket because the central banks will have print money 24/7 to monetize the debt if rates rise. Truly, this is a market mania. Extraordinary popular delusions...

adr's picture

Where's my negative rate mortgage assholes?

SillySalesmanQuestion's picture

Yeah! I would actually contemplate buying a home and new car if they paid me to do it...take one for the team fuckers.

viahj's picture

you'll soon have negative equity. 

Dragon HAwk's picture

So you have a billion dollars but you can't buy a Billion Ice Cream Cones.. I sense a problem coming...

  you would almost think there was too much money.... nah


THE DORK OF CORK's picture

The primary problem with Europe is that productions function is not consumption.

Productions function is (Insider) corporate wealth concentration.


All of the austerity in Ireland and car fuel consumption is higher then its previous peak in 2008......Austerity can simply defined as the rationing process required to transfer this new surplus toward the consumer war economy.

THE DORK OF CORK's picture

Europe is simply a racetrack economy


Current economic activity pointless for most.

Yen Cross's picture

 Tyler I have pretty general understanding of what/how ZIRP affects savers and investors, because of the patchwork of articles you've posted.

 I think it would be fantastic if you could put together a comprehensive piece or pieces discussing all of the issues that arise when central banks use this type of tactic, and the effects on people and economies.

 It would be great so individuals can use the information to protect themselves, and also gain insight into the theft of their savings, and loss of control over their money.

RougeUnderwriter's picture

And the Shmehita continues!!!  Next you are going to tell me that the Great Pumpkin is not real!! 

THE DORK OF CORK's picture

What we are witnessing is European civilizational collapse.

The European bond market really got going in the 19th century and destroyed all that was good within Europe.

The extraction is all played out now.


More Ammo's picture

Can anyone say "Funny Munny"?

Seasmoke's picture

I can't think of anything more bullish for Gold than NIRP. 

taopraxis's picture
taopraxis (not verified) Seasmoke Oct 28, 2015 12:33 PM

Fed Funds @10% would be far more bullish for gold...nirp will suck all of the financial oxygen out of the market.


yogibear's picture

Destruction of Europe continues.

How about that Sweden doing it's own suicide? All the refugees invading and they can't give away enough.

kaboomnomic's picture

Hey.. hey.. EU govt goes full panic retard on bonds eh?

Apparently? Most investor prepared for worst 2 future years. If they accept negative yields on 2Y bonds.

Must be REAAAAALLLYYYY BAAAADDDD coming up EU 2 front years ahead.


Calculus99's picture

I think we're starting to realise the rabbit hole goes a lot deeper than anyone thought possible. 

Look at the evidence.

If you'd said 3 years ago Italian paper would go negative yield, you'd be locked up and pumped full of valium for your own safety. 

THE DORK OF CORK's picture

The euro  finally put a end yo the european national supply chain just as these "natioñs" of the 19th century destroýed feudal localism back in the day.

Now there is no viable supply chain.

There is a nothingness


Haka Matohi's picture
Haka Matohi (not verified) Oct 28, 2015 1:43 PM

What other time in recorded history have interest rates been negative and issuers have been able to sell debt and get paid to do it?

Read Sydney Homer's book "The History of Interest Rates".

The reversal will likely be long and brutal.  Instead of sand in the petroleum jelly, expect glass shards.

Bottoms up.

Itsthetiming's picture
Itsthetiming (not verified) Oct 28, 2015 4:41 PM

Undue paranoia aside, the economy of the world have never quite been in such a complicated state of affairs. There are things going on today that would have made heads spin a decade ago.

With JPM and co. Holding all the gold contracts, where is the best place to store funds where it will not be depreciated further? Hell bloody knows because no one else seems to know either.

Stormtrooper's picture

Why can't I seem to find bulk ammo at negative rates?

Offthebeach's picture

Kensian onanisom.