Germany Issues Bills With Negative Yields As Economists Agree Country Is In Recession

Tyler Durden's picture

Continuing the schizoid overnight theme, we look at Germany which just sold €3.9 billion in 6 month zero-coupon Bubills at a record low yield of -0.0122% (negative) compared to 0.001% previously. The bid to cover was 1.8 compared to 3.8 before. As per the FT: "German short-term debt has traded at negative yields in the secondary market for some weeks with three-month, six-month and one-year debt all below zero. Bills for six-month debt hit a low of minus 0.3 per cent shortly after Christmas...The German auction marks the start of another busy week of debt sales across Europe. France and Slovakia are also selling bills on Monday, with Austria and the Netherlands selling bonds on Tuesday. Germany will auction five-year bonds on Wednesday, while Thursday sees sales of Spanish bonds and Italian bills. Italy finishes the week with a sale of bonds on Friday." Still the fact that the ECB deposit facility, already at a new record as pointed out previously, is not enough for banks to parks cash is grounds for alarm bells going off: the solvency crisis in Europe is not getting any easier, confirmed by the implosion of UniCredit which is down now another 11% this morning and down nearly 50% since the atrocious rights offering announced last week. On this background Germany continues to be a beacon of stability, yet even here the consensus is that recession has arrived. As Bild writes, according to a bank economist survey, Germany's economy is expected to shrink in Q1, with wage increases remaining below 3%. And as deflation grips the nation, potentially unleashing the possibility for direct ECB monetization, look for core yields to continue sliding lower, at least on the LTRO-covered short end.

From Bild:

The German economy is in for a weak start in the new year. This is the result of a survey of "World Online" under 14 bank economists. The majority of experts expected that the gross domestic product (GDP) over the past three months has shrunk.


In the first quarter of 2012, this decline is likely to intensify further. Technically, Germany is thus already in the midst of a recession. An economy is by definition in decline when economic output is two consecutive quarters.


However, economists expect that the decline in economic performance fail only mild and win the business over the course something to ride. More than 0.5 percent GDP growth in the average of the forecasts for Germany, but this year not in it - a significant drop compared to last year.


The year 2011 was € despite crisis all about economic growth. Almost all experts expect for 2011, with GDP growth of three percent. It would be the second consecutive year with a three before the comma. Exact figures will be presented by the Federal Statistical Office on Wednesday.


The progress of the euro crisis is for the economists in this year is the biggest risk factor for the German economy. "It has fueled uncertainty among businesses, and this uncertainty lies down now like mildew on the economy. This can not escape the well-established German economy, "said Joerg Kraemer, chief economist at Commerzbank.

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pynchon's picture

gold bitches

bullion cant have negative weight

fockewulf190's picture

It's like Ho's paying tricks for sex.

The Big Ching-aso's picture



The 2012 Commemorative Merkozy Porsche:   Vinyl seats, VW engine, Kumho tires on steel rims, and 0-62 in 15 seconds flat. 

Gauthijm's picture

Just how long this slow motion train wreck will take to develop?

More meetings, COnferences, COnfabs, and nothing is ever solved

I wonder if it blows up in 2012, or just like it started in 2008, will continue easily in 2013 and later


Ghordius's picture

come on, you should now know about EU crisis management: Merkel and Sarkozy have a meeting planned, which will also contain a plan to meet Monti, where they will plan to hatch a plan for a grand plan entailing a plan to go on planning a plan for sake of a plan to plan...

you get the gist - you can't solve multi-decade-spanning problems in a feew weeks, you impatient person, you

valley chick's picture

you can't solve multi-decade-spanning problems in a few years.  Fixed it for you.  :)


Ghordius's picture

"as deflation grips the (German) nation" the horror, the horror! Mild deflation, that is...

a small thing: the picture is from "Welt Online", not "Bild" - I was wondering since when Bild is going "financial"...

FrozenOut's picture

Wonder if central bankers are so scared of deflation (so much so that in the glory days they claimed that a "target" of 1% inflationary stealing of the peoples wealth was better than the "risk of deflation") not because "deflation is worse than inflation" but because they lose franchise in a deflationary environment. I've never seen any credible argument that mild deflation is worse than mild inflation. And whatever happened to "rational expectations?"

Al Huxley's picture

I think in a normal, steady-state type of system, mild deflation and mild inflation would be about the same. It's the ponzi scheme that is modern banking that can't tolerate deflation.

onebir's picture

Mild inflation of I lets the central bank set a minimum real interest rate of -I. With deflation, it's hard for the CB to get real rates below +I.

I think significantly inflationary theft of wealth only occurs when real rates go -ve: the only losses then are on cash and non-interest bearing accounts, assuming the inflation rate subtracted isn't biased :s

And I used to think that was normal ;-)

Problem with given CBs this extra leeway with interest rates is that - based on the last few years - this is actually a bigger license to screw up... 

orca's picture

Unicredit is down by over 40%, not 11%

navy62802's picture

How stupid do you have to be to purchase bonds at a negative interest rate? Imagine what people would say about a bank if it were to give away loans for which it would pay the borrower an APY. That's what investors are doing when they purchase bonds at negative interest. Haha ... the fools who buy these bonds deserve all of the bad things that are about to happen to them.

Urban Redneck's picture

Sovereign (supposedly high grade) Bonds are nothing more than the corporate-sized wallet's equivalent of a USD100 or EUR100 note.

kaiserhoff's picture

Yield free risk..., screams depression.

dick cheneys ghost's picture

if germany is in recession, what is the rest of europe in? rehypoticated depression?

onebir's picture

-ve yields. Just surreal...

TK7936's picture

Money for nothing and the chicks for free....

wonjuj's picture

wait, can someone explain this to me how can german bond yield go negative..? So do investors get less money when they mature?



TK7936's picture

Yes, they get less back than they give. And even more less because of inflation. Its insane and shows the desperation.

wonjuj's picture

so who would buy it?

swoop72's picture

maybe someone trying to dump their euros. a little loss is better than a total loss. or am i looking at this all wrong?