Deutsche Bank: "If One Wanted A Simple Indicator Of A Broken Financial System, Then This Is It"

Tyler Durden's picture

If there is one bank that is more concerned than any other about global central bank unorthodoxy, it is Deutsche Bank which as we reported yesterday, saw its stock price drop to a record low yesterday. As such it is not surprising that in his overnight note, DB's Jim Reid focuses on the "broken financial system" and highlights the one indicator that confirms just how broken the system is: the Bund Yield.

This is what he said:

The Moon landing, JFK's assassination, John Lennon's shooting, maybe even the Red Wedding episode from Game of Thrones. In years to come will they also be asking you where you were at the time you heard the news that 10 year Bund yields turned negative for the first time? For me it was in an airport in Vienna! Although there has been a creeping inevitability on this for several days now this landmark remains a truly remarkable event. If one wanted a simple indicator to reflect a broken financial system then this would be a strong candidate. In today's PDF we show 10 year Bund yields back to the early 1800s to put this move in some perspective. It's incredible when you think that the central bank responsible for the inflation rate in Germany has a target of (just below) 2% per year. Let us stress that until Governments/central banks change policy, yields are likely stay at ultra low levels due to secular stagnation type themes and the overwhelming amount of QE hoovering up bonds. However it still reflects a broken financial system.


Which is not to say that DB wants a return to normalcy. As we reported back in February, what DB wants is an end to NIRP and a return to more QE and, eventually, the start of helicopter money, both of which at least will not crush DB's own stock price if only in the immediate future. Until then, expect laments such as this one to persist and get louder.

Comment viewing options

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

Looks like the common market has been a roaring success.

tc06rtw's picture

 Who will tell the people  when  the people don’t want to be told?…

roddy6667's picture

They are too busy watching Game Of Thrones. What is that , anyway? Something like Jeopardy with the contestants on toilets?

RadioFlyer's picture
RadioFlyer (not verified) roddy6667 Jun 15, 2016 6:56 AM

Yes, with a random dragon that bites off heads.

Bokkenrijder's picture

I thought it was Deutsche Bank itself?

Dame Ednas Possum's picture

Yet another reason to keep stacking phyzz.

RaceToTheBottom's picture

Didn't the Dousch rename themselves to Lehman and take up dope smoking?

auricle's picture

 Lower that X-axis line down and the problem is resolved. 

nibiru's picture

Maybe they wanted reality to be more like GOT. More penis cutting action for society, while they all party like it's red wedding with central bankers - as of course they are on the brink of bankruptcy themselves

Haus-Targaryen's picture

For some reason, when I look at this chart, it reminds me of this commercial from like 10 years ago.

NoDebt's picture

Just sitting here thinking about raising rates while simultaneously doing QE (plus helicopter money).  Last time I thought about this my head exploded.  Now, I find I'm surprisingly comfortable with it.  I'm quick to adapt to insanity, I guess.  Probably a good skill to have in the coming years.

CarpetShag's picture

"The Moon Landing" LULZ  I was watching a Kubrick movie at the time.

shantyman's picture

I was at the Cape that day....July 17th to the 20th 1969

roddy6667's picture

When Kennedy got shot I was in Mrs. Clinton's 9th grade English class. The school piped the audio from a TV into the school public announcement system.

Yeah, I know. I'm fucking old. Hell, I partied with dinosaurs.

divingengineer's picture

It was 9/11 for Gen X.

I was shopping in a home Depot in Steubenville, OH. The company I was working for was  building a water intake in the Ohio River for a new treatment plant.

Wife called up with the most fucked up story.

Job was shut down, sitting at the hotel bar watching the jet fly into the 2nd tower over and over again for 2 days straight.

Why did they keep playing that clip?

Over, and over, and over without end.

The Presstitutes were creaming their jeans, it was the best thing to happen to them since the OJ trial.

A Nanny Moose's picture

Why did they keep playing that clip?


Eahudimac's picture

Looks like a dying person's last heart beat on an echocardiogram.

DeadFred's picture

Ssshhh! For some people references to last heartbeats can be a touchy subject.

de3de8's picture

And I would like to understand who and why one would provide their money knowing they will get less back down the road? Do they know the situation is that bad and therefore will settle to get less back rather than nothing?

Break_the_Bank's picture

If rates go even lower, then the bond will trade at a premium, right? Perhaps that is the bet. But considering the banks are doing everything they can to keep interest rates low, higher rates aren't likely in the near future. Then again, rates may rise on their own, in spite of the efforts to keep them down, at which point these bond holders will get killed. Wait, inflation is already killing them as it is clearly higher than zero, and probably already higher than the stated goal of 2% if calculated correctly. 

de3de8's picture

Break, thanks for insight, and as you state inflation is the outlier.

DeadFred's picture

Money has to exist somewhere, people forget this. When you have a few billion dollars or euros you find that mattresses and even vaults are not realistic storage options. Bonds promise almost the entire amount will be returned, 99.98% is better than cash in a vault minus security costs. A few keystrokes and your billions are as secure as the government. Hedging for the stability of .GOV requires something other than a financial transaction. This is as safe as a piece of paper can get.

Econogeek's picture

yes, 10-yr to 1 percent then revisit

DetectiveStern's picture

You lose even more if you hold digital cash at the ECB.

buzzsaw99's picture

i didn't even notice that bac, gs, et al started tanking again too. awesome.

That's great, this is really fuckin' great, man. Now, what the fuck are we supposed to do? We're in some real pretty shit now, man!

That's it, man. Game over, man. Game over! [/Hudson, Aliens]

NoDebt's picture

"Hudson, this little girl survived for longer than that with no weapons and no training."

[looks over at Janet Yellen]  "Right, Janet?"


"That's great, why don't you put her in charge?"


bada boom's picture

The 1923 to 1925 time period is very interesting and concerning.  Perhaps a repeat.

Gatto Carlo's picture

It tells us that the investors who buy those Bunds expect the stock-market to appreciate less than the inflation rate over the next 10 years... 

DeadFred's picture

It tells you that they run a fund that is required to put 30% of their funds in government bonds.

Darth Rayne's picture

Normalcy is where the economy can still grow depite banksters skimming 6% off everything.

Not the normal I would choose. 

venturen's picture

Don't worry we rescued some hedgefunds with offshore billions!

two hoots's picture

More people are attuned to (and affected by) the words and actions of CBs than any governments or their leaders.  "give me control of a nations.......".   A quiet coup d'etat.

venturen's picture

The world is run by insane evil bankers!

CHX's picture

Sounds like an ode to the reaper...

thaaanos's picture

Banks not accepting loses and a growing economy is mutualy exclusive. The more they fail to realize it, the more people will demand them to become the burnt offering to appease the Rain God.

founthead's picture

The Zero is just a psycological mark. All interest rates ought to be viewed relative to the current inflation rate (the "official" rate is just above zero - so yes, the "Real Rate" is negative!). The Real Rate of the 10 Yr Bund has been negative several times in the 200+ year history, and by wider margins. So, the negative rate is "Historic" in some sense, but not in effective terms.

NoWayJose's picture

Yet somehow, against this backdrop of 'we can't get inflation over 2%' - we see home prices in most of the EU double in the last 10 years, Food and Energy and Rents and Automobile and Land prices increase far more than 2%. Very similar to the US - it's hard to find anything that is cheaper than it was 10 years ago. And it's not like the EU has actually 'hit' 2% in any year - the numbers are often below 1%. So I suppose a pair of shoes made in Vietnam dropped in price because it was cheaper than shoes made in China?

RaceToTheBottom's picture

The only thing missing is Paulson to come to Congress screaming that the sky is falling, the sky is falling and the only thing to save the financial system is full spigot money printing.

DaNuts's picture

The real rate is what you pay on your credit card, everything else is paper.

financialrealist's picture

Pot calling the kettle black. I'm sorry the one indicator is you DB... CDS and Equity price. DB is the proverbial canary in the coal mine. CDS Breached 210 yesterday...not in front of my Bloomberg so not sure where they are today. But they have doubled since Dec 2015.

Goldbugger's picture

Looks like DB is at a multi year support line. What's next????

hedgiex's picture

Laments aside, Just amazing that the fire is burning your neighbor house (DB) and the muppets are waiting for rain than run. Incurable delusion in not protecting yourself from immediate.nearby fires and believing in the banksters who themselves are furiously saving their ar'ses. DB should be gone by now.