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BofA Looks At Europe's Record €2.6 Trillion In Negative-Yielding Debt, Is Shocked At What It Finds
Yesterday we reported something that has never happened before in Europe: 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.
As we further noted, this brought back memories of a post we did back in January when JPM was shocked to find 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."
Overnight BofA's Barnaby Martin decided to break down the most recent total and found something staggering: that €1.4 trillion number is a long gone memory and has been replaced with a "negative-yielding wonderland." To wit:
The easing bias of central banks in Europe over the last week has exacerbated the shortage of positive-yielding assets. Negative-yielding government debt in the Eurozone has jumped from €2tr to €2.6tr over the last week and now stands at a record high. The previous peak in negative-yielding government debt was €2.4tr, reached in April this year prior to the “Bundshock”.
Visually Europe's monetary twilight zone looks as follows:
This was the be expected, as now every single activist central-bank is exporting deflation with a passion. The result is that negative yields have led to even more... deflation.
The problem of low inflation remains evident. Swiss inflation has collapsed into very negative territory, albeit precipitated by the SNB abandoning their currency peg earlier in the year. While Danish inflation has moved away from zero post big rate cuts in 2015, it is still hovering at just 0.5%. And Swedish inflation has been stuck around zero since early 2013.
So while everyone is gradually realizing that unconventional monetary policy using the bank reserve pathway simply does not work to increase broad inflation (however it does miracles for asset-price, i.e., stock market, inflation) which in a world drowning under $200 trillion in debt is the only goal, and will ultimately be replaced with the hyperinflationary endgame of simple monetary paradrops, also known as central-bank funded fiscal stimulus or "helicopter money", for now the hope is that doing more of the same which is clearly not working will finally work, and lead to the much desired jump in inflation.
Alas, it won't, because as we have stated for years, and where Bank of America finally "gets it", frontrunning central banks purchases of government bonds, which pushes yields to zero and in Europe's case, well below, is in itself the most deflationary signal possible.
Recall that the thinking behind NIRP was simple: to force people out of their savings and to invest their rapidly devaluing cash in either the stock market or the real economy. However, since as shown above, everyone is merely frontrunning the ECB's future purchases, yields continue sliding signalling a tsunami of deflation...
... which in turn makes the money in the bank even more valuable.
And this is where BofA admits something that, at least to its own conventional sensibilities, is quite amazing: NIRP is achieving the opposite of what it was meant to achieve.
The problem of low inflation remains evident. Swiss inflation has collapsed into very negative territory, albeit precipitated by the SNB abandoning their currency peg earlier in the year. While Danish inflation has moved away from zero post big rate cuts in 2015, it is still hovering at just 0.5%. And Swedish inflation has been stuck around zero since early 2013.
And the stunner:
Yet, household savings rates have also risen. For Switzerland and Sweden this appears to have happened at the tail end of 2013 (before the oil price decline). As the BIS have highlighted, ultra-low rates may perversely be driving a greater propensity for consumers to save as retirement income becomes more uncertain.
The evidence:
By the way, "perversely" is the term economists use when reality not only does not comply with their models but does precisely the opposite of what was intended.
BofA concludes:
For now, negative rates as a policy tool remain a “work in progress”, judging by the current inflation levels across Europe. But the rise in household savings rates amid so much central bank support is paradoxical to us, and mimics what we highlighted in the credit market earlier this year. Companies in Europe are deleveraging, not releveraging, and are buying back bonds not stock.
Despite NIRP, therefore, “animal spirits” across companies and consumers in Europe have yet to be stirred.
And that is how, in a very polite way, you admit Europe's monetary policy has failed.
But fear not: when even "moar" QE and NIRP do not work, and the economists of the ECB admit the "monetary twilight zone" was a disaster, there is one last "tool" they can and will use - helicopters.
Because when it comes to printing money, whether in digital reserve format, or physical paper format, there is literally no limit how much can and will be created to achieve what is the endgame of the current monetary dead end: the total destruction of fiat as a store of wealth in order to preserve the global equity tranche while wiping away a few hundred trillion in debt.
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Paul Eberhart enjoys paying more for something now than in the future. www.pauleberhart.com
https://www.facebook.com/4funsociety/photos/a.178003795588213.60115.1768...
OK, serously we got to admit that everything is clearly not awesome and not ok. Negitive intrest on that much debt? This is insane. How long can it go for, who knows but I do know that it will not end well for the little people (me and everyone else) that live in the real world.
What’s sad is most that buy government debt, particularly at negative rates do so unknowingly.
Japan, bitchez. Been my call since I was born here on ZH. Still looking like a good call with every passing day.
Ahhh, a Vapors fan eh?
https://www.youtube.com/watch?v=mgekmOqCFTU
pods
Obviously the only rational response to steeply negative interest rates is to sell gold, below the bid, in unlimited quantities, in the US paper ""markets""
Because when things go bad you want to have your money in the stockmarkets. Which can only go up.
In nominal terms.
Yes. And most people are being forced one way or another into the casino... err trap.
I want to see the motherfucker crash due to real market forces that are in effect today, but at this point, it either goes full Zimbabwe or it waits until something gets so terribly broken that it cannot be papered over and all hell breaks loose before it crashes.
Even at the Casino, there's a good bet - the buffet.
Just took some profits and bought 5 cases of Yoders for LT storage.
What is even more sad is that bankers still don't get it that no matter how much money they print, as long as it doesn't reach the main street and average joe it won't spurr inflation. The moment they start to figure out a way to send billions/trillions to the average person then you will see velocity in money and starts changing from hand to hand. Only then, i repeat, ONLY THEN you will see inflation. All they do now is create uncertainty and 95% of the people on earth don't trust the system anymore since the Lehman collapse and rather save money instead of buying things from it. So let the central bankers save themself a headache and give us all the billions to buy BMW's and new houses and clothes etc. Then you will see some proper inflation.
Oh they get it alright. The game is to use paper fiat to purchase all of the real assets left in the world. It's a big club and you ain't in it.
OK, so at this point, just get your piece of the pie in Ag.
Pretty sure it's not Hansel and Gretel buying...it's the hedgies seeking capital appreciation by front running the CB's.
If you can flip a soveriegn @106 two days later for 108...who gives a shit what the coupon is?
this is the CBs' plan
Seriously, what does it take to get people to buy shit they don't need with money they don't have.
Maybe they should be welcoming all those refugees, (whoops) I mean migrants in order to increase economic activity internally.
God help us if Americans all decide to stop using their credit cards at the same time. The whole economic world would stop rotating.
gun sales will be up, as european humans are forced to sink to the invasion of violent subhuman's level. why anyone would do this to their own hard fought for country is a complete mystery to me.
accross europe https://www.facebook.com/saku.kytola/videos/10206420670148817/
She had no weapon. What was she thinking?
Getting people to spend money would simply take a shift away from supply-side economic thinking. Reagan brainwashed America so thoroughly it will never happen until it's too late.
Why not blame it all on a long dead president? All this get people to borrow and spend is demand side economics. To do something for supply one would need to make it possible for Americans to be producers. Like manage the national forests and harvest some wood instead of letting it accumulate and burn. Or how about more doctors instead of Obomber insurance. Insurance money is demand not supply. The only thing in gross over supply in America is lawyers and they don't produce anything but trouble.
Americans have curtailed their credit card use. Go look up how much revolving credit there is and compare that to the past.
Fuck those post 2008 intrest rates.
-10% since 2008.
https://research.stlouisfed.org/fred2/series/REVOLSL
More than replaced by non-dischargeable student loans.
https://research.stlouisfed.org/fred2/series/SLOAS
Forward to the debt plantation, slaves.
Now this is interesting. http://english.farsnews.com/newstext.aspx?nn=13940730000210
Israeli military officer captured with ISIS terrorist by the Iraq military.
They better be careful. They gonna get bombed by Putin.
Of course ISIS is being run by the western intel agencies. It costs huge amounts of money to arm / equip / feed / house / and transport said militants not to mention support them with all the strategic intel etc.
It's all being run by western Intel and funded by friendly (and corrupt) middle east Governments. Hence the one country at a time takeover (Iraq, Afghanistan, Egypt, Libya, etc.) and when they ran afoul in Syria they had to seqway the mass of dudes outside the country and then call them (er.... or market them as) something different as they were obviously not all Syrian militants.
Bibi visited Putin ahead of invasion. It's all scripted.
http://www.cnn.com/2015/09/21/world/russia-israel-netanyahu-putin-meetin...
Wonder if Obama is going to bring this up when BiBi comes calling in November?
There is enough bull shit on ZH wothout you adding yours.
Stunned bitchz!
Europe's problem is they haven't done enough. Any credible eCONomist will tell you that you need to take on moar debt to get out of this mess. Just as Paul Krugman, he'll tell you. And he's a Nobel peace prize winner just like Obama, so he knows what he's talking about.
What a great window of opportunity for implementation of structural reforms by the PIIGS.
I do not agree that the purpose of zirp and nirp were to force people out of their savings, though that may have been one stated reason. Basically, the central banks are monetizing insolvent governments and financial institutions. Now that financial markets have stalled, due to the zero rate boundary and the maturation of the credit cycle, additional policy initiatives are needed. Translation: Recession within depression will turn government finances even more upside down, so more money is needed to prop up the financial pyramid.
No private owner of negative-yield debt is likely to hold that debt if they know how to manage money. Take the capital gain and bank the cash at a low positive yield, or hold and draw regular income? Buy a negative yielding security? Why not just throw your money in the trash? No one with a brain is moved by the propaganda. The central banks are running a pyramid game and their losses will eventually bankrupt the system and be revealed just like embezzling is always revealed. There are no bottomless wells of money in the world, today.
^^^TP^^^ has it.
You think the financial/university elite give a rat's ass about the "middle class" (a moment of silence in its passing)? Creatures of the government trough from cradle to grave, their only interest, in the face of mere facts and the failure of their "models", is keep the gravy train going for them and the other "elite".
well, it's not working so well yet. in order to monetize the sovereign debt, NIRP must be pushed out harder and faster and along the curve. France's neg 2yr isn't going to make a dent in their insovency anytime soon and -25bps on Uncle Sam's debt wouldn't even be felt, such as a train @ 60mph hitting a fly. NIRP is their tip toe into the waters of full out hyperinflation.
we are quicly approaching the end game of direct monetization of sovereign debt by CBs, which will then blow up. then we have the global reset. got gold? (and any other resource) because the banks sure do.
The High Priests of Financial Fraud.
^^^TP^^^ has it.
You think the financial/university elite give a rat's ass about the "middle class" (a moment of silence in its passing)? Creatures of the government trough from cradle to grave, their only interest, in the face of mere facts and the failure of their "models", is keep the gravy train going for them and the other "elite".
Getting people to spend is a part of it. Our monetary system requires perpetual growth, and people buying shit that they don't need is part of that growth. Without it, the government has to take up the slack on spending, else the ponzi scheme collapses. In that respect, yes, financing insolvent governments is the goal, but forcing people to spend and keeping insolvent governments afloat are opposite sides of the same coin. CBs must have growth that they are not going to get without fraud, and that fraud will only take them so far.
We just need more storage units. Let's convert all those closed strip malls, pronto!
https://en.wikipedia.org/wiki/Self_storage#Self_storage_today
Instead of banking your money wouldn't you pull it out and try to take a loan at NIRP?
Perhaps you can have your cake and eat it too.
Perhaps you can have your cake and eat it too.
Actually you can always have your cake and then eat it... however, you cannot eat your cake and then have it...
https://www.youtube.com/watch?v=zc5gBQUOTZw
Keiser interview on subject
all your debts are turned to shit. Iceberg dead ahead!!!
went to a VW dealership yesterday ...20% off the list is what their offering ....I gave him my phone# and told him to call when it's 50% off . there was nobody in the showroom .
Wait for the "going out of business" signs!
negative farfegnugen?
More of this to come as 2016 gets closer.
Europe = "world's largest geriatric petting zoo" (h/t Doug Casey)
Negative rates will eventually reduce debt in the Eurozone without a spectacular bond market crash. But negative rates in Europe support gold prices.
Negative rates on this scale are uncharted territory. They make little sense, so expect seemingly nonsensical results. We'll only be able to figure out how the reactions to them were logical in hindsight.
Lol this is like saying if you have credit card debt the solution obviously is more credit cards. Banks should approve more credit as well. What a life... never pay any back and revolve into lower interest payments.
The analysts and authors keep missing a big reason why individual savers are putting more money into banks - no one that I know says 'I save more because of Fed easing' or 'I'm afraid of deflation' - rather they save more because they get nothing in interest. Thus they need to save 4 times as much with interest rates at 1% as they would have with interest rates at 4%. Where has all the money gone that might have been spent to stimulate the economy? It has gone into low interest savings and bonds.
1% interest in a bank?
HAHAHAHAHAHAHAHA!
0.1% is more like it.
Imagine that, if people can't count on a pension plan for retirement, they will save for retirement as much as possible. These fucking geniuses never figured that would happen. But don't worry you savers, bail-ins are in the works. Got hard assets?
Thank-You! Someone who can see exactly what's going on...
1) Make the Sheeple panic (Sorry, got told off last time I refered to them as Sheeple!)
2) No pension for you matey.
3) Throw as much as they can into the bank, for a rainy day. (Retirement)
4) Banks full.
5) Bail-In
..and 'poof' just like that millions of 'savers' money has gone to save the banks.
What will everyone do? Sweet fuck all, that's what they'll do, unless they want a load of cops stomping on their faces in every major city across Europe and the U.S.
In ancient Rome when things got funny people hoarded money (gold coins back then).
Yeah, these guys are real studies of history aren't they. In this case, I agree. The herd is being rounded up. Off the slaughter house!
Bank of 'Murica.. I wonder if they speak German... perhaps they could hire someone from DB, because as far as I know Geschichte des Zinsfusses im Griechisch-römischen Altertum bis auf Justinian (The History of Greco-Roman Interest Rates from Antiquity to Justinian) has never been translated into English (like a whole bunch of other important works if one wants to seriously study economic history).
The boomer(me) generation has been played their whole lives and they still think they're the smartest people in the room. Most of my boomer relatives think gold is for cave men, even though, one of their dad's used to preach about how Nixon's abandonment of gold was going to be the ruin of our nation. The most closed minded (Orwell's doublethink https://en.wikipedia.org/wiki/Doublethink) generation of all time.
One the other hand, "when people lose everything and they have nothing left to lose, they lose it."
-Gerald Celente
Helicopter drops? No such luck. That money will be used to buy votes from the FSA. Heaven forbid a white male with a family get something for nothing.
Hey, you got privilege man, white privilege. What are yo bitching about? Now get to work slave!
And feel guilty for it too. White priviledge aint free.
Added another layer to my paper gold long position despite the failure of the market to dip through support...risky, but I'm getting too bullish to wait. I will probably continue buying on any further decline tomorrow but I'm about done for today.
Okay...gold support just broke. Losing patience *never* fails to cost me money. I'll be adding another 10% to the position and calling it a day.
Why in god's green earth would you buy paper gold? Or are you going to try and ask for delivery?
Physical gold is a long term investment, one that should definitely be in every portfolio, in my opinion. However, the paper variety is more liquid and I like to trade it when I am expressing a short term market opinion. Not suggesting others should do so at all...life at the tables in the casino can sometimes get expensive.
So unsustainable that one must wonder how long before the collapse of the union? Coupled with the migration of terrorists and rapers, their fate is not rosy.
the problem for governments issueing negative yield paper is they have to pay the buyer, notes go off at less than par. how can governments afford to do that?
CB QE.
Tyler: "And that is how, in a very polite way, you admit Europe's monetary policy has failed. "
and I beg to differ. this, in a very polite way, means that the EUR is functioning as designed for this Great Currency War
Bank of America: "Despite NIRP, therefore, “animal spirits” across companies and consumers in Europe have yet to be stirred"
thanks, but no, thanks. the last thing that we want is to have those "animal spirits" of Greenspan stirred, here
and the day that any analyst from BofA has something good to say about the european situation is the day that I am seriously worried
Without a common debt, the EU is hog-tied in latter stages of any currency war... which we are rapidly approaching.
Deleveraging and savings are signs of a lack of trust in central banks. Hardly signs of strength. Rather are indications that the next stage of this mess might be ready to unfold. Why? It is all a confidence game in the first place.
Likewise, buying back bonds is basically akin to jumping out of the frying pan into the fire. It is government debt that is going to collapse, not private.
The problem with the Keynesian strategy is it assumes the government can issue debt and use the money for productive purposes, thus to create new value, thus to offset stagnation. The problem is the possibilities to expand production are not there. The limitaitions on productive uses of capital created the problem in the first place.
" For many a decade past the history of industry and commerce is but the history of the revolt of modern productive forces against modern conditions of production, against the property relations that are the conditions for the existence of the bourgeois and of its rule. It is enough to mention the commercial crises that by their periodical return put the existence of the entire bourgeois society on its trial, each time more threateningly. In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity — the epidemic of over-production. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce. The productive forces at the disposal of society no longer tend to further the development of the conditions of bourgeois property; on the contrary, they have become too powerful for these conditions, by which they are fettered, and so soon as they overcome these fetters, they bring disorder into the whole of bourgeois society, endanger the existence of bourgeois property. The conditions of bourgeois society are too narrow to comprise the wealth created by them. " - you know who.
Hi
George H.W. Bush New World Order Speech - YouTube
!Jeb is done.
Press 1 for Spanish
Press 2 for standing on my tippy toes
Press 3 for English.
Oh Sure! If I had alot of money I would pay someone to use it for free.
Before the governments were taking on debt to support the banks. Banks are worse off. But now governments are so bad off that banks are paying the governments to sign up for moar. No wait. The banks are getting free money from the governments to pay extra less to the governments for their debt. Hold it. I am confused. I think if I hang upside down and read it backwards it will make sense.
Deleveraging vs. Inflation:
Las herramientas del sistema fiat.
Weird he?
Inflation up over 40% in the last 7 years!!
40!!!
SALARIES DIDN'T!!
INTEREST RATES DIDN'T!!
AND TAX INCREASES EVERYWHERE!! THEY'RE COMMING OUT OF MY EARS AND ASS!!
man o man... we're so going down the drain so fast...
We won't survive the next 7 years and the way shit is going it's picking up speed.
Why do people still believe Central Banks' stated policy goals?
Since those goals are consistently missed while the policies remain in place, could it be that their real purpose simply doesn't match the stated goals?
The Central Banks aren't failing. They're winning, and they're winning big.
How does this affect real estate pricing?
Looking at buying a house in Europe in one of the negative interest countries shown in that image.
I'm not an financial expert, but I do very well realize the huge global financial mess.. but it makes making certain decisions hard. Enough knowledge not to be ignorant, but what is wisdom if you cannot trust your media and your banker etc anymore?
"And Swedish inflation has been stuck around zero since early 2013." Let me get this straight - no prices (housing, food, cars) have gone up at all in Sweden for over 2 years? I am getting tired of this no inflation bullshit. ALL my prices have gone up. Taxes are the worst. Yeah I know the fable about "technically" inflation is the increase in money supply, but that's a foolish technical argument like how many angels can dance on the head of a pin while we all go broke.
First, there is no "technically" when defining inflation... simply put, it is an increase in the money supply.
Second, price increases or decreases in consumer goods and other common household expenditures are not necessarily a function of inflation or deflation, although they can be.
Third, when you define inflation or deflation as the change in price of a particular asset, good, or service, then you are accepting the same methodology that hides inflation through tracking price fluctuations. We'll just net all the increases against the decreases, leave out a few items (e.g. gasoline), and see, there isn't any inflation. When viewing it this way, it should be abundantly clear why you do not define inflation or deflation based upon price tracking.
So if inflation is just an increase "in the money supply" (which is not the way the word is actually used by the vast majority of people), why is the Fed continually using some traumatized version of a consumer price index to determine the level of inflation and not simply going to its own readily available data on the money supply?
To obfuscate its effect and maintain its status as a going concern... Those decisions are also bootstrapped to fiscal policy, but an independent FED couldn't consider that... while my comments were overly broad, here is a bit more refined statement on the matter: https://wiki.mises.org/wiki/Price_inflation (In short, defining inflation around price increases is defining it around an effect, not a cause - an incredibly dangerous proposition).
PS, there is no need to make an argument from popularity (logical fallacy)... "which is not the way the word is actually used by the vast majority of people"
nirp is about the banks, not the economy.
admittedly centrals banks claim that the two share a common fate but that's bullshit.
Those hundred year Mexican Euro Bonds @4.2% are looking better every day huh?
Failed questions asked by a cable TV business channel. Fucking idiots. That God I didn't watch.
First half of 2015 – Oil, the Middle East, Charlie Hebdo… Last resilience tests of the Western “model”: commit suicide or adapt http://geab.eu/en/first-half-of-2015-oil-the-middle-east-charlie-hebdo-l...The next thing will be to ban cash so that they can force people to maintain bank accounts and rob them further. Everything will go electronic and there will be no place to hide from the government.
If cash is banned, I'll move my money out of the banking system. One might go into physical gold or silver or platinum or palladium or something else that is tangible and liquid. Use cash only for necessities and keep cash balances at the minimum. NIRP will cause bank runs to develop over time...
Set your algos to be the Agent of what ECB and their functionaries buy and then buy from the markets. It helps to pay for the utilities. Negative NIRPs have to be sucked out of markets with more monies. Oh what about the debts...don;t ask pesky questions.