Der Verkauf Ist Verboten - Germany Considers Ban On Sovereign Bond Sales

Tyler Durden's picture

When back in August, Europe declared a short selling ban of any financials (here we are willing to channel Romney, and make a $10,000 bet with anyone that said ban will never be lifted), and which as we predicted has had no favorable impact on bank stocks which have since tumbled, we suggested that the next step will also be the final one: the passage of laws prohibiting sales of any kind. As usual we were partially joking. And as so often happens, we are about to be proven right again. As the FT reports in its headline article today, whose gist is simple enough, that Europe is on the verge, it is the tactically-placed final paragraph that is of particular curiosity. It says the following: "Speaking on the fringes of a start-of-year retreat of her Christian Union lawmakers in the city of Kiel, Ms Merkel said she would consider calls from her party colleagues for legislation to bar institutional investors such as insurance companies from selling bonds when ratings were downgraded, or fell below investment grade." Allow us to recopy and repaste the key part: "legislation to bar institutional investors such as insurance companies from selling bonds."

And there you have it: after everything else has failed, the state, not the politically independent, if at least on paper central bank, is about to formally enter the capital markets. And yes, first it will be a ban of selling on downgrades, then it will be a ban of selling on any downtick, and finally it will be a ban of selling anything and everything.

Naturally, since whatever is left of the market is still oddly rational, and somewhat forward looking, those who are still foolishly long the bonds will dump them asap, before this idiotic law is passed and finally crashes the European market.  Correction: the market will be there, but it will consist entirely of the ECB only buying bonds, and never selling to comply with German capital control laws. Because after all Frau Merkel has elections to consider, and it will hardly be beneficial if the Dax were to be cut in half in an election year.

We do find it odd that insurance companies are being targeted - as these, just like AIG, are being completely ignored for the time being. Perhaps not much longer, and goes back to our thesis that Allianz & Generali, aka "A&G", are about to be the European equivalent of AIG, whose demise also began with that one particular rating agency downgrade.

And for anyone who thinks this form of lunacy is limited to Germany, we have news: it isn't. With Obama facing a daunting reelection task, one can be 100% certain that this and other potential laws are being contemplated (not least of which is the one-time financial asset tax as explained here back in September), and will likely take place just as soon as QE3, which SocGen believes will begin in March, fails completely to do much if anything about the market collapse, let alone the economy, the unemployment rate, and inflation.

Comment viewing options

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


Ho. Ly. Shit.

Note to self: never buy another sovereign bond again, as you'll never be able to get unstuck from the tar baby.

trav7777's picture

the entire systems of bond ratings are complete bullshit anyhow.  They should all be D

hedgeless_horseman's picture



In a world of hold to maturity who the fuck will bid the long bond?


Yield rally cometh!

xela2200's picture

I think they mean sell short. Otherwise, say bye bye to bond "market."

Manthong's picture

I forget, is it the first or last ones out of a Ponzi that make out best?

Oh regional Indian's picture

Capital Controls?

Capital I say. On that Note(!), why is so important to be the King of the Hill? CapitOl hill? 

OT, but not really, the net is being cast widely, so no one population group panics completely. in India right now, the hot topic is Internet Censorship. Google, Yahoo and FB are on the dock. The problem? Painting politicians in bad light, aka...telling the truth. 

India. focus is Internet Censorship and population tagging through universal ID, Eu is sovereignity loss and capital controls, ME is "No Rules apply", China is failure of Klepto-pseudo-capitalism, South America is Drugs and the new communists (and cancer???)....

Not sure if I'm conveying what I'm seeing, it's like various memes, that can easily be gathered into a master meme of "This just dos not work" when the time is right.



Hober Mallow's picture

I think its a misreading of someone in the communication chain.

What Merkel probably meant is that she would like to have legislation NOT REQUIRING ANYMORE that those investors CAN ONLY INVEST in AAA instruments.

As you may know, currently, there is legislation specifying those kind of things. Merkel is probably talking about laxing those requirement not imposing aban on trade.

I hope so.



caconhma's picture

A holly smoke. Here comes a moment of complete desperation when EU leaders are losing their mental capacity to function. It is just insane.

We are reaching the end-game.

Michael's picture

Does anybody know the exact day the NASDAQ/Dot-Com bubble went bust?

Does anybody know the exact day the housing bubble went bust?

I know these two economic bubbles did in fact go bust, but can anybody pinpoint the exact days?

I think I need to buy a gun's picture




TruthInSunshine's picture

I'm late in responding, but I bet the translation is garbled.

It makes far more sense to assume that Merkel is proposing that insurance companies, pension funds and other institutional investors not be forced to sell (i.e. not be required by law to only purchase & hold) sovereign debt having investment grade status, for purposes of liability on such holdings/purchases.

If the translation others are coming to is correct, then it's very scary to think of what lay ahead.

lewy14's picture

I believe you will be proven correct in this instance.

Still, if you think about how bankruptcy happens - gradually, and then suddenly - one day we will all be surprised at the pace of events.

One day, the glaciers will sprint.

TruthInSunshine's picture

A correction to what I wrote above, even though lewy got it (and other apparently did, too):


I wrote that

It makes far more sense to assume that Merkel is proposing that insurance companies, pension funds and other institutional investors not be forced to sell (i.e. not be required by law to only purchase & hold) sovereign debt having investment grade status, for purposes of liability on such holdings/purchases.

There's a NOT that should have been in there, as in:

It makes far more sense to assume that Merkel is proposing that insurance companies, pension funds and other institutional investors not be forced to sell (i.e. not be required by law to only purchase & hold) sovereign debt NOT having investment grade status, for purposes of liability on such holdings/purchases.

Blank Reg's picture

Now THAT makes sense. Even Merkel isn't that bat shit crazy!

Mr Lennon Hendrix's picture

I've concluded that the global equty market collapsed in July of '07.  Is there a day for the housing market?  Probably not, but the time I use was the summer of '05.  Is there a day for any major collapse?  Not since the late Reagan signed the PWG has there been anything but a controlled market.  In fact, when something big does happen, it is the PTB flexing nuts.  For example, the Flash Crash:  They were reminding Congress who holds the purse strings.  The Fall of '08, when Paulson threatened Martial Law and dropped the indexes through the floor, same thing.

So your point is well taken; the real collapses are subdued and slow until a trigger point happens which can be blamed for a sudden move.  For example, let's say the Fed issues QE X, and then the next week Iran closes the straight, well QE X combined with the rest of this financial shitshow was enough to crater the Fiat Ponzi, but any collapse will be blamed on Iran.

GetZeeGold's picture



The slowest train wreck in history ever......makes sense it's also the biggest.


Take public funds and short gold....and at the same time buy gold with private funds....pretty it as many times as the markets will allow. Hence the speed of the train wreck.


Throw a little dab of crazy into the mix to freeze everyone else.....hell of a recipe.



mick_richfield's picture

but can anybody pinpoint the exact days?

I want to propose that you look at a different moment: the first moment when the smartest players first realize: We Are Doomed.  The moment when the designer of the Titanic, sitting in his suite, sees the coffee in his cup trembling and thinks "Oh shit."  The moment when Chuck Yeager's engine flames out on the new big jet, and he thinks "Oh, fuck me."

The ship keeps floating for a long time after that moment.  The jet still climbs higher.  But you're doomed.

For the dot-com bubble, I say that moment was the day had its IPO.  (November, 98?)  It went from $1 to $17 in a New York minute, and the WSJ reported the next day that, of all the people who bought the stock, 90% did not know what business the company was in. 

And I thought "Oh, shit."




zhandax's picture

Or when the designer of the Titanic realizes, "Oh shit, Johnny Morgan is eradicating Astor, Guggenheim, and Straus, on my boat!"

eurusdog's picture

What ever she meant, without clarity, the market will panic by getting out of everything just in case the worst is realized.

akak's picture

I would like to see the bond rating system use the names of metals rather than mere letters, to whit:


Mercury (a special sub-category for bonds which are particularly "liquid")
Lead (a special sub-category for bonds which are prone to rapidly sinking)



Or, perhaps we could make some analogies with chemical bonds, in order from most to least strong:


   (1) Triple
   (2) Double
   (3) Single

Stuck on Zero's picture

You forgot the loosest bond of all: James Bond!

philipat's picture

Or, to quote Rosie, "Bonds have more fun"?

Manthong's picture

“A baited banker thus desponds,
From his own hand foresees his fall.
They have his soul, who have his bonds;
‘Tis like the writing on the wall.”

“The Run Upon the Bankers” (1720), Jonathan Swift
Quoted by Mark Steyn “After America: Get Ready for Armageddon”, (2011),  p2


RiverRoad's picture

+1      Great quote.....a classic.

bigkahuna's picture

You left out tungsten it is a new day --  LOL!

stocktivity's picture

Angela knows Benny has her backside covered....ahhh Gez...what a thought.

Ghordius's picture

The old bag of tricks has a huge collection in it...
But is this correct? Can't find any German sorce...
Only on the FT? "Considering calls from backbencher of the CDU".
Methinks the FT is on a strange path again...
The FAZ online writes "Der Gesetzgeber könne dafür sorgen, dass bestimmte Anleger weniger stark vom Urteil der Agenturen abhängig seien", which is definitely not the same.

Ghordius's picture

It's "allow to keep", not "bar to sell".
HUGE DIFFERENCE. Dear ol' FT not up to it?

nonclaim's picture

Same thing... allow to keep it (at face value until maturity) because being forced to sell at a loss will break things beyond repair.

Non Passaran's picture

I agree.
I think they're setting up a stage to push pension funds and insurers to park money in Bunds and hold to maturity.

Vengeance's picture

Good job Ghordius! Looks like you were one of the very, very few to use their brain and check other sources as ZH has completely misconstrued the facts as I am certain they had read some of the other articles floating around that illustrate much more clearly what Merkel was referring to versus the "selling bonds will be illegal" that ZH so MSM like had their headline read for sensationalism.

To the other readers here, Zh does a great job (they used to do a fantastic job) of writing some very interesting and often entertaining pieces on the markets and I often recommend this site to friends and acquaintances whom have an interest in the market, while at the same time cautioning them to take everything said here with at least a few large grains of salt.

So seriously, before jumping on the comment band wagon and taking everything ZH reports at face value, use your brains first. I'm sure the Tylers often sit back, read some of the comments here and have a great laugh at some of the idiodic lemming-like behaviour many of you commentersdisplay despite espousing the exact opposite and calling other people sheeple!

buzzsaw99's picture

Thank you for the clarification.

mick_richfield's picture

FT kann Deutsch ja ganz gut verstehen, wenn Sie verstehen wollen.

Mountainview's picture

Another prove: Merkel has a Sovjet view on financial markets

Mountainview's picture

Sovjet spirited Angela- command economy soon ( in Europe)

Vengeance's picture

Yep. Fuck holding sov. paper as even with CDS protection the collectors of the premiums (banks) are trying to wriggle out of those payouts, too!

But regarding the article, I think that this point from the FT article (can't sell bonds) is assuming readers have more info concering this point. Merkel wasn't saying that investors CAN'T sell. From what I understand of her comments (from other sources like Reuters) this article is more than likely referring to what she had said previously regarding downgrades and that they (EU govt's) will look into legislation and see if it can be changed so that institutional investors don't have to sell debt based on ratings (downgrades) from (US) ratings agencies... That if they can change the legislation, it would allow these institutions to do their own homework on the credit ratings of debt they wish to purchase instead of having to follow ratings agencies ratings.

But even changing the legislation is blatantly self serving for the govt's, and also the fact that the ratings agencies are trying to claw back credibility after their massive collective failures re subprime debacle is just as self serving.

Regardless of each group trying their best to eschew their own self-serving interests, two facts remain. 1) gov't paper is junk world-wide and 2) Ratings Agencies are full of fucking shit as well as the truth is that there are few if any AAA deserving nations [FULL STOP]

I'm Canadian and our debt shouldn't be triple A as rated by S&P. In fact, the most ironic thing here is that when they downgraded Canada back in the early 1990s, Canada's debt-to-GDP was less than it is now. In fact, a couple years after the downgrade to AA+ on Canada's sov. debt the debt-to-GDP ratio peaked at 68%. Depending on whose numbers you look at today, the current debt-to-GDP in Canada is at best 68% and at worst 81% (or thereabouts - sources are IMF, World Bank and OECD) so the current debt-to-GDP ratio is at best matching the peak in the mid-1990s when Canada was AA+ and we are currently AAA? How the fuck does that make sense?!?!?!

My point from this illustration is to back up my comment that there at best very few true AAAs and more likely next to none.

Vengeance's picture

Here's the link to the article which talks about the legislation change idea I mentioned:Merkel vows faster eurozone reform after downgrades - Reuters

And the relevant part of the article:

Meanwhile, in a move to circumvent their influence, Germany's Merkel backed a proposal to reduce the reliance of institutional investors on ratings agencies, which some of her allies say are politically driven.

The idea would be to introduce legislation to allow institutional investors to evaluate risk themselves and make decisions independent from the U.S.-based agencies.

"I think it is very useful to look at this and see where if necessary we can make changes to legislation," Merkel said at her party meeting.

Vengeance's picture

A quick comparison between Weiss Ratings and S&P Ratings (I think all the S&P ratings reflect the recent downgrades):



Country         Weiss Ratings     S&P Ratings
Australia         C+                        AAA
Austria            B+                       AA+
Belgium          C                          AA
Canada           C-                        AAA
China              A-                        AA-
Denmark         B                         AAA
Finland            C                        AAA
France            C                         AA+
Germany         C+                      AAA
Greece            E                        CC
Hungary          C-                       BB+
Iceland            D+                     BBB-
India               C                        BBB-
Ireland            E+                      BBB+
Italy               C-                       BBB+
Japan             C-                       AA-
Netherlands    B                        AAA
New Zealand   C                        AA+
Norway          B+                      AAA
Portugal         D+                     BB
Russia            C+                     BBB+
Singapore       A+                     AAA
South Korea    B+                     A+
Spain             D+                     A
Sweden          B                       AAA
Switerland      A-                      AAA
United Kingdom  C-                  AAA
United States     C-                   AA+


Comparison of Ratings Scales

Ratings       Bands     Weiss          S&P                     Moody's                 D&P/Fitch
Secure         1             A+, A, A-      AAA                     Aaa                        AAA

                   2             B+,B, B-        AA+,AA, AA-        Aa1, Aa2, Aa3         AA+, AA, AA-


                   3             C+,C, C-        A+, A, A-, BBB+   A1, A2, A3              A+, A, A-, BBB+                                                                                               BBB, BBB-            Baa1, Baa2, Baa3    BBB, BBB-        

Vulnerable    4             D+, D, D-      BB+,BB, BB-,        Ba1, Ba2, Ba3,        BB+, BB, BB-, 
                                                      B+, B, B-              B1, B2, B3              B+, B, B-


                   5             E+, E, E-,      CCC+, CCC, CCC-   Caa1, Caa2,           CCC, CC, C, RD           
                                                      CC, C, D, NR          Caa3, Ca, C


Understand the Weiss Ratings Scale

1. For all of the rating scales it compares, the GAO uses the Weiss scale as its standard to help identify two broad categories — secure and vulnerable. On the Weiss Ratings scale, the dividing line between secure and vulnerable is between the grades of C- and D+. On the rating scales of the other agencies, it is between a BBB/Baa and a BB/Ba or equivalent. In other words, a downgrade to D+ by Weiss is the equivalent of a downgrade to speculative grade or “junk” by the other agencies.

2. Within the secure category, the GAO identifies three bands. It considers

  • Weiss A grades equivalent to the triple-A grades of the other agencies;
  • Weiss B grades equivalent to their double-A grades; and
  • Weiss C grades equivalent to their single-As and triple-Bs.

3. Within the vulnerable category, the GAO identifies two bands. It considers

  • Weiss D grades similar to the double-Bs and single-Bs of the other agencies, and
  • Weiss E grades as corresponding to the various C and D grades of the others.
SilverDoctors's picture

Jim Willie on how UniCredit is about to take down a dozen western banks. 

So next on tap is UniCredit going bad, going bust, failing, turning to dust. And when that happens look for at least another couple Italian banks to also go bust. And when that happens look for the French banks to go bust. The three major French banks. Credit Agricole, BNP Paribas, and Societe Generale. And when that happens look for at least one or two London banks to go bust- they’re all inter-connected!  When one or two banks go down, it’s going to hit overnight, hit rapidly, and probably involve a dozen banks. That’s my feeling Doc.

Element's picture

Think I'll go an enjoy the last few months of peace and plenty.

Vaiman's picture

Rather than let these major banks fail, I'm sure the govt will step in to bail out Unicredit.

ZeroPower's picture

Weiss ratings? Youve gotta be shitting me. A bigger fucking joke than the 3 'known' agencies.

Vengeance's picture

Because you are so obviously an expert on credit ratings and such that you can easily (and have most definitely done so already as you do this for fun right?) go through the methodology and calculations that each agency uses and that is what you are so clearly basing your pulchritudinous and infallible logic on, correct?

I imagine your own methodology on ratings is much more complicated and involved. Unfortunately for you and your aspiration of one day being a world renowned credit analyst, well this is most likely not to be actualized as drawing in crayons on pink (cause you're a flaming asstard) construction paper and posting 'your' garbage, err... I mean 'ratings' on your fridge in your run down, flea ridden trailer to show off to your ass-munching, mullet sporting 'friends' (*wink wink) are much more detailed and insightful than any one of the 3 'known' agencies or Weiss' ratings, right?

So seeing that you have some aversion to Weiss ratings (failed bathroom stall 'meeting' in an airport perhaps?), please do share and explain, to us mere mortals if you are able to dumb it down to our level, using your oh so eloquent prose the 'why' behind your dismissal and contempt for Weiss ratings.  Or even better, spare us any of your further enervative gibberish of pretending you know fuck all about what you are talking about. Leave the discourse to educated adults and if in the future should your opinion be wanted (highly implausible), I'll contact you personally and give it to you. 

So instead of spouting of banalities, why not take the time to actually compare the ratings posted (we'll use S&P as a proxy for the 3 'known' agencies) and see which companies' ratings seem to be more in line with reality.

I'll be the first to admit that I'm not about to sit down and take the time to devise my own method for rating sovereign debt (assuming I even could), so if I had to choose one of the ratings agencies to follow it would be Weiss instead of the 3 'known' agencies as not only did they [Weiss] downgrade the US ahead of S&P's downgrade, but at least, as one example, they have Ireland in the right category as an E+ seeing that they had to take bailouts to avoid defaults, etc. However, S&P has them rated a BBB+ the exact same as Italy and Russia... Would you, in your humble opinion, agree with the S&P that Ireland deserves to be rated the same as those two countries despite neither of them having to be bailed out? Trick question! Remember, if Anyone wants your opinion, I'll give it to you so stay stupid and shut the fuck up!

GetZeeGold's picture



I like for my ratings to chocked full of official propaganda.....thank you very much.