Dos Free Money » Bonds http://www.dosfreemoney.org Financial Topics Today Sun, 05 Feb 2012 15:29:31 +0000 en hourly 1 http://wordpress.org/?v=3.0.4 Germany sells bonds guaranteed to lose money http://www.dosfreemoney.org/index.php/2012/01/24/germany-sells-bonds-guaranteed-to-lose-money/ http://www.dosfreemoney.org/index.php/2012/01/24/germany-sells-bonds-guaranteed-to-lose-money/#comments Tue, 24 Jan 2012 04:20:23 +0000 admin http://www.dosfreemoney.org/index.php/2012/01/24/germany-sells-bonds-guaranteed-to-lose-money/ 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.

]]> http://www.dosfreemoney.org/index.php/2012/01/24/germany-sells-bonds-guaranteed-to-lose-money/feed/ 0 EU Said to Sell 3 Billion Euros of Bonds Through EFSM Fund http://www.dosfreemoney.org/index.php/2012/01/22/eu-said-to-sell-3-billion-euros-of-bonds-through-efsm-fund/ http://www.dosfreemoney.org/index.php/2012/01/22/eu-said-to-sell-3-billion-euros-of-bonds-through-efsm-fund/#comments Sun, 22 Jan 2012 19:10:13 +0000 admin http://www.dosfreemoney.org/index.php/2012/01/22/eu-said-to-sell-3-billion-euros-of-bonds-through-efsm-fund/ EU Said to Sell 3 Billion Euros of Bonds Through EFSM Fund
January 09, 2012, 10:33 AM EST

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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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]]> http://www.dosfreemoney.org/index.php/2012/01/22/eu-said-to-sell-3-billion-euros-of-bonds-through-efsm-fund/feed/ 0 Vietnam Bonds Decline on Speculation Banks Selling to Raise Cash http://www.dosfreemoney.org/index.php/2012/01/15/vietnam-bonds-decline-on-speculation-banks-selling-to-raise-cash/ http://www.dosfreemoney.org/index.php/2012/01/15/vietnam-bonds-decline-on-speculation-banks-selling-to-raise-cash/#comments Sun, 15 Jan 2012 22:55:18 +0000 admin http://www.dosfreemoney.org/index.php/2012/01/15/vietnam-bonds-decline-on-speculation-banks-selling-to-raise-cash/ 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