NIRP Absurdity Sets Record, Euro Stocks Drown in Bear Market
by Wolf Richter
WolfStreet.com
June 14, 2016
Glorious times for Draghi’s scheme.
The negative-yield absurdity marked a new and glorious milestone just now: the 10-year yield on German government debt fell below zero for the first time ever. It is currently at -0.03%, bouncing up and down, kissing a positive yield before falling back in to the negative.
German government debt with shorter maturities has been negative for a while. The ECB has just started buying euro-denominated corporate bonds, in addition to government bonds, covered bonds, and asset-backed securities, in an effort to accomplish whatever schemes it has on its agenda. So even some corporate debt with short maturities has been trading at negative yields. But today marked the first time in Europe that 10-year debt has joined the club.
The German 2-year yield is down to -0.59%.
So what does this do for the banks and hedge funds and others who bought these bonds earlier, those that got the word years ago that Draghi would go bonkers and truly do whatever?
The price of a Bund that matures in July 2040 with a 4.75% coupon rose to 202.6 cents on the euro on June 13, according to the Bundesbank, more than doubling the money for investors that had gotten into the game early enough. They’re the real beneficiaries of Draghi’s well-engineered scheme.
The Rest…HERE
