The German government managed to sell four billion euros worth of bonds with a negative yield Monday, meaning investors were willing to pay for an asset guaranteed to lose money.

The average yield for six-month German bonds sold by the European Central Bank on Monday was -0.0122 per cent. That means when the bonds come due on July 11, 2012, an investor is guaranteed to get back less than the original sum invested.

Its more about whats happening elsewhere than whats happening in Germany, but its certainly a pretty telling development, said Ian Nakamoto, research director at MacDougall, MacDougall amp; MacTier in Toronto.

Its hard to put a million dollars under the mattress.– Ian Nakamoto

Unlike corporate bonds, government treasury bills do not pay interest. Rather, investors typically buy the bonds at a discount, redeem them at face value and pocket the difference as profit. But buyers of Germanys bonds on Monday paid slightly more than the face value of the bond today for the right to redeem them at face value in six months time.

Any time they sell debt, its a test of the market, absolutely, said Richard Pilosof of RP Investment Advisors in Toronto. Its a test of Europe and it shows the market thinks they havent created a real solution yet.

The weighted average price was 100.00616 euros to receive 100 euros in six months time. Thats the first time Germanys bond yield has gone negative in the initial auction, though it has dipped below zero in the secondary market from time to time.

Demand for the debt was strong — the cover ratio for the offering was 1.8, meaning there were almost twice as many people wanting to buy the debt as there were bonds up for sale.

To me, its more like a safety deposit box than an investment, Nakamoto said. People go to their bank and pay a fee for the bank to keep their valuables in a safety deposit box. Youre not trying to earn interest, you just want to park what you have there and youre willing to pay a fee to have the family jewels protected.

Its hard to put a million dollars under the mattress, Nakamoto said.

In all, there were offers to buy 7.08 billion euros worth of German debt at the negative yield, but Germany only had four billion for sale.

Safe haven

Germanys previous six-month debt auction on Dec. 5, 2011, had a yield of 0.0005 per cent — microscopic, but still positive.

The strange phenomenon of investors lining up to buy an asset they know will lose money is a testament to how bleak things look in Europes economy. Even though their money is guaranteed to shrink, investors were willing to pay Germany for the privilege of losing a small amount of money with them rather than possibly losing a lot more by investing in shakier economies elsewhere on the Continent.

Germanys negative yield contrasts with that of other eurozone economies such as Italy and Spain, which are currently paying the highest amount since the early 1990s to borrow money from investors.

Any time Germany sells, its less about credit quality and more about supply and demand, Pilosof said. Theres just more buyers than sellers because theres too much cash than can go into [other things] and nobody wants to go into Spain and Italy, he said.

The yield on debt from Switzerland and the Netherlands has previously swung negative, but Germanys economy is much more significant. France, Slovakia, Austria, the Netherlands, Spain and Italy are all scheduled to have bond sales this week.

EU Said to Sell 3 Billion Euros of Bonds Through EFSM Fund
January 09, 2012, 10:33 AM EST

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• Luxembourg Said to Nominate Mersch for ECB Board Position
• Corporate Defaults May Climb Above 8% in Europe, S&P Reports
• Regling Confident EFSF Can Be Leveraged Fourfold, Spokesman Says

By Ben Martin

(For more on euro crisis click on EXT4. Adds Merkel, Sarkozy’s meeting in seventh paragraph.)

Jan. 9 (Bloomberg) — The European Union is selling 3 billion euros ($3.8 billion) of 30-year bonds to help pay for the rescues of Ireland and Portugal, in the first deal by the 27-nation bailout fund in more than three months.

The European Financial Stabilisation Mechanism’s bonds will be priced to yield 125 basis points more than the benchmark swap rate today, according to a banker involved in the transaction. The sale is the first from the EFSM, the 60 billion-euro fund of the EU’s executive arm, since it issued bonds due 2018 on Sept. 29, according to data compiled by Bloomberg.

“It’s somewhere to park your money with relatively low risk, which really is something that many investors are on the hunt for given the ongoing declining scope of safe havens,” said Richard McGuire, a senior fixed-income strategist at Rabobank International in London.

The EFSM is operated by the European Commission and backed by the EU’s member states. Like the 440 billion-euro European Financial Stability Facility, which is guaranteed by euro-region nations and sold 3 billion euros of bonds last week for Ireland and Portugal, it borrows money to siphon to cash-strapped governments.

Amadeu Altafaj, a spokesman for the Commission in Brussels, declined to comment.

Longest Maturity

The bond has the longest maturity of any notes offered through the EFSM, according to data compiled by Bloomberg. Previously, the longest-dated bond sold by the fund was the 4 billion-euro 3 percent note due in 2026 issued on Sept. 22, Bloomberg data show.

The EFSM is selling the bonds as German Chancellor Angela Merkel and French President Nicolas Sarkozy meet for the first time this year to flesh out measures to resolve the euro-region debt crisis that started in Greece more than two years ago.

The bonds’ maturity “shows confidence in the EU but doesn’t necessarily mean there’s confidence in the euro,” said David Watts, a strategist at CreditSights Inc. in London.

The price of the EFSM’s 1.1 billion euros of 2018 securities rose to 99.44 cents on the euro, after declining to 95.11 in November, according to Bloomberg Bond Trader prices.

BNP Paribas SA, Barclays Capital, Deutsche Bank AG and Goldman Sachs Group Inc. are managing the new issue, said the banker, who declined to be identified before an official announcement. The EFSM has already raised 28 billion euros for Portugal and Ireland through bond sales in the past year, according to data compiled by Bloomberg.

–Editors: Paul Armstrong, Michael Shanahan

To contact the reporter on this story: Ben Martin in London at bmartin38@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net

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Vietnam’s five-year bonds fell on
speculation an increase in money-market rates prompted banks to
sell the securities to raise cash. The dong was steady.

Overnight (VNCDON) interbank borrowing rates climbed to 12.25
percent today, the highest level since Dec. 16, from 11.95
percent on Jan. 6, data compiled by Bloomberg show. The money
market will continue to face shortages in the early months of
2012, the National Financial Supervisory Commission wrote in a
report released today. The central bank should inject cash into
banks to help ease the funding crunch, Deputy Chairman Le Xuan
Nghia said in a meeting with economists in Hanoi.

“Due to low liquidity, banks have been selling bonds to
raise cash,” said Tong Minh Tuan, deputy head of research at
Hanoi-based BIDV Securities Co., a unit of Bank for Investment amp;
Development of Vietnam.

The yield (GGVN5YR) on the benchmark five-year note gained three
basis points, or 0.03 percentage point, to 12.54 percent, the
biggest increase since Dec. 23, according to a daily fixing from
banks compiled by Bloomberg.

The dong was unchanged at 21,030 per dollar as of 5 pm in
Hanoi, according to data compiled by Bloomberg. The central bank
fixed the reference rate (SBVNUSD) at 20,828 today, unchanged since Dec.
26, according to its website. The currency is allowed to trade
up to 1 percent on either side of the rate.

The government may lower the reference rate by as much as 6
percent this year as gold buying puts downward pressure on the
currency, according to the Financial Supervisory Commission’s
report.

To contact Bloomberg News staff for this story:
Diep Ngoc Pham in Hanoi at
dpham5@bloomberg.net

To contact the editor responsible for this story:
Sandy Hendry at
shendry@bloomberg.net

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NEW YORK, Jan. 9, 2012 /PRNewswire via COMTEX/ –
Bonds.com Group, Inc. (otc.bb:BDCG)(otc.bb:”Bonds.com”) announced today that it is undertaking a strategic initiative to transform the market structure for the trading of U.S. Corporates. Effective immediately, the firm’s BondPro platform will be available for trading from 6:00 AM ET. This is the first in a series of planned moves to make bond trading more available to Bonds.com professional trading clients worldwide and to expand the efficiencies already provided by Bonds.com during market hours.

The initiative is in response to client demand and reflects Bonds.com’s commitment to bringing innovation and efficiencies to the historically inefficient trading in smaller size.

BondsPro is available globally. With the expanded hours, U.S. traders will now have an opportunity to transact prior to traditional market opening. Equally important, traders in non-U.S. markets have historically been hampered in accessing U.S. trading until traditional market hours. There has been an unmet need for a mechanism to facilitate trading in this pent-up non-U.S. demand. The ability to trade in the expanded hours now provided by Bonds.com addresses this global market inefficiency.

Bonds.com’s wholly-owned subsidiary Bonds.com, Inc. (“BCI”), a FINRA registered Broker Dealer and ATS, offers access to live liquidity and execution through its web based electronic BondsPRO platform. BondsPRO provides professional traders over 70,000 thousand live prices (with 65 million price updates daily) on 10 thousand different issues from over 300 contributing counterparties. BondsPRO posts live, anonymous, and executable orders on a single bond or list basis, and permits price negotiation. Its all-to-all connectivity allows supply to meet demand, thereby increasing efficiency and reducing spread. BCI is a neutral counterparty to all trades, acting as a riskless principal.

George O’Krepkie, President of Bonds.com said: “There is nothing magical about traditional market hours. We recognize bond trading has become a global 24 hour global business. With this move, bond traders in North and South America, Europe, and the Middle East will be able to access true liquidity and execute trades in other than traditional market hours. The demand for efficiencies in bond trading, especially in today’s environment, mandates a creative and innovate approach. We deliver on that expectation”

Forward-Looking Statements

The statements made in this press release which are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include, without limitation, statements regarding our ability to expand and grow the company, our ability to operate competitively and pursue growth objectives, our future performance and management’s ability to anticipate industry developments. Such forward-looking statements may be prefaced by words such as “anticipate”, “expect”, “believe” and words with similar meanings. As a result of a number of factors, actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause our actual results to differ materially from those in the forward-looking statements include, without limitation, general economic conditions and the risks set forth in our Annual Report on Form 10-K for the year ended December 31, 2010 and in our other filings with the U.S. Securities and Exchange Commission from time to time. The company is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise.

Bonds.com, Inc. – Member FINRA/SIPC/MSRB

About Bonds.com Group, Inc.

Bonds.com Group, Inc., through its subsidiary Bonds.com, Inc., serves institutional fixed income investors by providing a comprehensive, zero subscription fee online trading platform for Corporates. The company provides a global solution for trading small lot inventories electronically.

SOURCE Bonds.com Group, Inc.

Copyright (C) 2012 PR Newswire. All rights reserved

A push by Australias government to create a retail corporate bond market could prove dangerous for investors who dont understand credit markets, a leading fund manager told Deal Journal Australia.

The remarks by Warren Bird, co-head of global fixed interest and credit for Colonial First State Global Asset Managementone of Australias largest bond buyers, come as Canberra attempts to deepen the corporate bond market by cutting red tape for issuers and enticing retail investors away from equities.

We should stop trying to artificially create an Australian bond market and instead encourage Australian companies to fund themselves as cheaply as they can where ever they can from around the world, Bird told Deal Journal Australia in an interview.

Australias A$1.4 trillion pension savings pool is one of the worlds biggest, but investors favor equities over fixed-income products. Only around 16% of the countrys pension industry is invested in bonds, according to the Association of Superannuation Funds in Australia.

The government will need to educate retail investors of the asymmetric nature of debt versus equities as an asset class and highlight the risk of downgrade and default, he said.

We really are concerned that retail investors see a headline yield and think thats all there is to it, the fund manager said, adding retail investors should park their cash in credit via managed funds. The equity mentality transferred over into corporate bonds is dangerous.

Colonial prefers to buy credit through a globally diversified fund and Bird was cool on the notion that local wholesale investors should be buying more corporate bonds issued by Australia-based corporates.

Our responsibility is a fiduciary one to our investor base, not a moral one to the corporates of Australia.

As of June 2011, Colonial had US$160.0 billion in assets under management, US$55.0 billion of which was invested in debt securities.

On Australian state debt, Bird prefers securities issued by the governments of News South Wales, Western Australia and Victoria. You can pick up more yield in Queensland but theres a bit more risk as well, he said.

Globally the fund is eyeing high-yielding corporate credit and Bird said he is happy to hold Italian debt around the 7.0% level, but has no appetite to buy bonds issued by the European Financial Stability Fund.

Supranational and agency debt issued out of Europe remains attractive, he said, adding the fund is comfortable with its European Investment Bank holdings despite a sharp widening in their spreads.

A euro-zone bond would be an attractive asset, though major questions remain over the single currencys future.

There are still big risks there, Bird said.

Like us on Facebook or follow us on Twitter @WSJAustralia.

NEW YORK, Jan. 9, 2012 /PRNewswire/ — A broad range of bondholders including institutional holders and secondary holders with over $800 million of secured bonds of Rescap have organized in response to recent press reports that sources close to Ally were considering causing Rescap to file for bankruptcy protection. The Secured Bondholder Group seeks to work constructively with Rescap and its advisors to ensure that secured bondholders receive the par recovery they are entitled to receive. The group is represented by White amp; Case and expects to increase in size and number.

The Rescap Creditor Group is concerned with media reports that assert that Ally may attempt to abandon Rescap without taking responsibility for Rescaps liabilities. Gerard Uzzi, of White amp; Case, who is representing the Group stated Ally, Ally Bank and Rescap are too intertwined to be easily unwound. A forced Rescap filing would be a big mistake and create significant litigation against Ally.

SOURCE White amp; Case

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By Michael Aneiro

Over the past 30 years, Treasuries have eked out the narrowest of victories over stocks, returning 11.03% per year over that time, versus 10.98% for the S&P 500. But don&’t count on a repeat of that over the next few decades, writes Jonathan Burton in a special fund-investment section in today&’s Wall Street Journal. Burton writes:

[R]ight now stocks, particularly dividend payers, look more attractive than bonds–especially if down the road there&’s resurgent inflation, which whittles away fixed-income returns.

&“The bond outlook is extraordinarily bad,&” says Jeremy Siegel, a Wharton School finance professor and author of the best-selling &“Stocks for the Long Run.&” Bonds are in vogue and overvalued, much as stocks were at the end of the 1990s, he says. After 30 favorable years of declining yields and rising prices, the best case for bonds over the next couple of decades is a return of &“zero&” after inflation–and more likely a negative outcome, Mr. Siegel predicts.

Stocks surged in the 1980s and 1990s, only to post a negative 0.9% yearly return from 2000-2009. Now, stocks look comparatively cheap. Meanwhile, Treasury bond yields have marched steadily lower and now stand near historic lows, limiting both income and upside appreciation. Investors continue to seek out the safety of Treasuries because of ongoing stock-market volatility, tepid economic growth and continued euro-zone debt problems. But investors with longer time horizons would be better off in stocks than in bonds, Burton writes:

If interest rates climb in future years, as is likely from today&’s very low levels, the prices of existing bonds with lower rates will fall. The impact may be felt more keenly by holders of bond mutual funds and exchange-traded funds than by investors who have bought individual bonds. The latter have the option to collect their bonds&’ full face value at maturity, while bond funds don&’t mature.

&“We&’re in the very mature stages of the secular bull market in bonds,&” says David Rosenberg, chief economist and strategist at Toronto-based investment firm Gluskin Sheff + Associates Inc. &“I&’m not bearish on fixed income, but when the five-year [Treasury] note is below 1% you know the game is not over, but it&’s close to being over.&”

Stock prices, in contrast, don&’t appear inflated. At the end of 2011, the Standard & Poor&’s 500-stock index traded at just under 13 times estimated 2012 earnings–cheaper than its 17.5 average price/earnings ratio since the end of World War II, according to S&P Capital IQ. Compare that with March 1999, when the S&P 500 traded at 33.5 times earnings.

Burton adds that the 10-year Treasury&’s current yield of right around 2% suggests below-average U.S. stock returns of 6% annualized over that time frame, including dividends and before taking inflation into account.

SEC Said to Review Possible Inside Trades in MF Global Bonds
November 10, 2011, 5:06 AM EST

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• MF Global Customers Have Few Options to Access Frozen Cash

By Joshua Gallu and Shannon D. Harrington

Nov. 4 (Bloomberg) — The U.S. Securities and Exchange Commission is reviewing trades in MF Global Holdings Ltd. convertible bonds to determine whether some investors sold the debt based on confidential information before the firm’s demise, according to two people with direct knowledge of the matter.

Investigators are in part focusing on trades that were made ahead of announcements that the firm’s credit rating had been downgraded, the people said, speaking on condition of anonymity because the matter isn’t public.

MF Global, the holding company for the futures broker run by former New Jersey Governor and ex-Goldman Sachs Group Inc. Co-Chairman Jon Corzine, filed for bankruptcy Oct. 31 after concerns that it may lose money on its holdings of European sovereign debt prompted demands from regulators to boost capital, as well as credit downgrades and margin calls.

Regulators are reviewing whether some investors learned in advance and traded on news that pushed the company closer to bankruptcy, the people said.

In one instance, MF Global’s $287.5 million of 1.875 percent convertible notes due in 2016 fell as much as 1.1 cent to 68.7 cents on the dollar on Oct. 24, one hour before Moody’s Investors Service announced that it cut the company’s credit ratings to the lowest investment-grade rating and was considering cutting it to junk, according to Trace, the bond- price reporting system of the Financial Industry Regulatory Authority.

Last Two Hours

About 32 percent, or $6.5 million, of the total $20 million of bonds traded on Oct. 24 were executed in the two hours preceding the downgrade, Trace data showed. Convertibles allow investors to exchange bonds for stock when shares of the issuers reach preset levels.

Trading in MF Global’s common shares didn’t follow the same pattern. The stock rose as much as 2.2 percent in the hours leading up to Moody’s announcement. After the downgrade, the stock fell as much as 5.4 percent to $3.49.

John Nester, an SEC spokesman, declined to comment. MF Global spokeswoman Diana DeSocia said it’s the company’s policy not to comment on price movements in its shares and bonds.

MF Global announced in September that Finra required the firm to boost capital in its U.S. unit because of the holding it had amassed in European countries’ bonds as concerns about their ability to repay mounted. On Oct. 25, the day after Moody’s announced the downgrade, the company reported its largest-ever quarterly loss of $191.6 million, and Corzine disclosed $6.3 billion of exposure to bonds from countries including Italy, Spain, Belgium, Portugal and Ireland.

Missing Money

In papers filed this week in U.S. Bankruptcy Court in Manhattan, MF Global listed debt of $39.7 billion and assets of $41 billion. The company is being investigated by regulators for money that may be missing from client accounts, according to two people with knowledge of the matter.

U.S. regulators have subpoenaed MF Global’s auditor, PricewaterhouseCoopers LLP, for information on the segregation of assets belonging to clients trading on U.S. commodity exchanges, according to a person briefed on the matter.

The Commodity Futures Trading Commission sent the subpoena seeking information about $633 million missing from customer accounts, said the person, who spoke on condition of anonymity because the matter isn’t public.

In the auditor’s most recent formal action on behalf of its client, it gave MF Global a clean audit opinion in its May 20 annual report.

Chris Atkins, a spokesman for PricewaterhouseCoopers, declined to comment on the subpoena. Steve Adamske, a CFTC spokesman, declined to comment.

–With assistance from Silla Brush and Jesse Hamilton in Washington, and Saijel Kishan in New York. Editors: Lawrence Roberts, Gregory Mott

To contact the reporters on this story: Joshua Gallu in Washington at jgallu@bloomberg.net; Shannon D. Harrington in New York at sharrington6@bloomberg.net.

To contact the editors responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net; Alan Goldstein at agoldstein5@bloomberg.net

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Jefferies Bonds Fall as Firm Rejects European Debt Concern
November 04, 2011, 12:54 AM EDT

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• Amgen Leads Most Corporate Bond Offerings in U.S. in Five Months
• U.S. Bank Default Swaps Increase on Italian Contagion Concern
• Corporate Credit Risk Benchmark in U.S. Rises for Second Day
• UBS, Citigroup Said to Team Up on Commercial Mortgage Bond Deal

By Tim Catts and Sapna Maheshwari

(Updates with investor comment in third paragraph.)

Nov. 3 (Bloomberg) — Jefferies Group Inc. bonds fell amid concern that smaller brokers may have a harder time raising funding after the collapse of MF Global Holdings Ltd.

Egan-Jones Ratings Co. cut Jefferies credit grade one level to BBB-, citing a “changed environment” after the collapse of MF Global and concern that its $2.7 billion in “sovereign obligations” on Aug. 31 is large relative to equity. Jefferies said in response it has no “meaningful net exposure” to European sovereign debt.

“The market sees another wholesale funded broker-dealer and is shooting first and asking questions later,” Lon Erickson, a money manager who helps oversee $9 billion of fixed-income assets at Thornburg Investment Management Inc. in Santa Fe, New Mexico, said in an e-mail.

Jefferies’s $800 million of 5.125 percent notes due in April 2018 declined 5.5 cents to 85.1 cents on the dollar at 1:47 p.m. in New York, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. The debt yields 8.2 percent, or 667 basis points more than similar-maturity Treasuries, Trace data show.

“Recent reports and calculations appear to have been focusing only on long inventory,” which amounted to $2.7 billion and doesn’t include hedges, New York-based Jefferies said in a statement. The firm has net short exposure to Portugal, Italy, Ireland, Greece, and Spain of about $38 million, or about 1 percent of shareholders’ equity, it said.

‘Abrupt Failure’

MF Global sought bankruptcy protection on Oct. 31 following downgrades to junk by Moody’s Investors Service and Fitch Ratings stemming in part from a $6.3 billion bet on the bonds of Europe’s most indebted nations.

“The abrupt failure of MF has made investors suddenly more aware of risk in the investment banking business, especially for firms that aren’t bank holding companies and that aren’t ‘too big to fail,’” Gimme Credit analyst Kathleen Shanley wrote in a note yesterday. The firm maintains a “stable” credit score on Jefferies, citing a lack of sovereign debt holdings and leverage ratio about half the size of MF Global’s.

–Editors: Pierre Paulden, Mitchell Martin

To contact the reporters on this story: Tim Catts in New York at tcatts1@bloomberg.net; Sapna Maheshwari in New York at sapnam@bloomberg.net

To contact the editor responsible for this story: Pierre Paulden at ppaulden@bloomberg.net

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