QOTD: Bund Dearth

QOTD: Quote of the Day

Nice pithy quote, which thoroughly encapsulates our narrative of global markets that the major central banks have created a yuuuge shortage of risk-free assets tipping the world economy into a bizarro Twilight Zone, where, now even Petrobras bonds trade with a negative yield.  You heard that right, Petrobras, Brazil’s state oil company.

Some speculate the ECB will soon reach its limit of 33% ownership of a single issue and be forced to raise it to 50%, as the German government is reducing the stock of bunds with perennial budget surpluses.  Many believe a -2% handle on the bund is in the cards during the next round of QE by the ECB.

Please, don’t ask: What is the bund market telling us?

bunds are “scarce potatoes” – Bond Vigilantes 

By the way, Germany and Japan have the world’s oldest populations.  Don’t you think reducing the income of retirees through QE may have/had some unintended economic consequences?

It is probably more difficult to turn a 60-year something German conservative investing retiree into a stock jockey than it is retraining a coal miner to become a data scientist.  The political blowback against QE in D-land is already evident, and will most likely grow as the country comes under tremendous pressure to implement a massive fiscal stimulus to save the euro zone economy, while receiving  -2 percent on their bunds.

It’s getting complicated, folks.

This entry was posted in Bonds, Uncategorized, Weekly Eurozone Watch. Bookmark the permalink.

2 Responses to QOTD: Bund Dearth

  1. You have a lot more international experience that we do. Under Japanification since japanese society itself is quite submissive to authority. Surprised in Europe we have not seen a rebellion from upcoming and existing retirees (50+ years of age). US and Europe have been fairly active/proactive democratic cultures. Why have the people not demanded a law that says ecb rates cant be below inflation at least – supply/print money but not below that benchmark to protect retirees.

  2. Pingback: Can Treasury Issue An Additional $1 trn At These Fake Yields? | Global Macro Monitor

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