France joined a handful of euro-zone countries Monday in selling short-term debt at negative interest rates as investors seek alternatives to expensive German and Dutch debt.Select Yields From WSJ
The negative yield at Monday's German auction, the lowest on record in this maturity segment, means that investors effectively pay the German state for the privilege of holding its debt.
The Dutch State Treasury Agency had already sold Treasury Certificates, or short-term debt, at negative yields. Now the French government is doing so as well.
- Germany: Germany sold 3.290 billion euros of six-month Treasury bills, known as Bubills, at an average yield of -0.0344%. The record lows was previously -0.0122% seen at an auction Jan. 9.
- France: France sold EUR 3.917 billion of 13-week Treasury bills at an average yield of -0.005%, down from 0.048% a week ago, and it sold EUR 1.993 billion of 24-week Treasury bills at an average yield of -0.006%, down from 0.096% last week.
Supposedly, French yields of -.005% are a veritable "bargain" compared to German yields at -.0344%
The Journal notes "Several large money-market funds restricted or closed their European funds to new investments after the ECB cut the deposit rate to zero, as they have struggled to provide returns to investors. This emphasizes the unforeseen effects of the extreme monetary policy actions that are currently being carried out by the ECB," said Rabobank's fixed-income strategists.
Unforeseen or Ignored?
It should be easy to foresee such effects.
In the US, the seen effects are the impacts of low rates for those on fixed income. In addition, record low rates makes it impossible for pension plans to meet their over-optimistic goals of 8% annualized returns when interest rates are near zero.
Bernanke has to understand these things. If so, he simply chooses to ignore them for the benefit of banks over everyone else. What he fails to understand is he is doing no one any favors!
10-Year Yield Back Above 7% in Spain, Above 6% in Italy
As short-term yields plunge in Germany, France, and the Netherlands, long-term yields are soaring elsewhere in Europe.
Yield on 10-Year Spanish Government Bond closed at 7.062%
Yield on 10-Year Italian Government Bond closed at 6.015%
As I have repeatedly said, nothing has been solved. It took less than a week this time for yields to head back North.
Mike "Mish" Shedlock
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