GERMANY’S SAFE haven status in the euro zone crisis has reached new heights with investors paying the German government to accept their money.
An auction of €3.9 billion in six- and 12-month debt yesterday ended with a negative return to investors of 0.0122 per cent, meaning Berlin earned about €242,000 on the transaction.
The finance ministry declined to comment on the windfall but sources said there was more concern than euphoria in German government circles.
“This can be traced back to uncertainty on the market,” said Jörg Müller, spokesman for the federal finance agency in Frankfurt that organises German debt auctions. Investors submitted €7.08 billion in bids for the €3.9 billion in bonds on offer.
“We assume we are dealing with a temporary phenomenon,” said Mr Müller. “There are always two sides to every coin and this insecurity will make itself felt somewhere else.”
Somewhere else is the record yields for other euro zone bonds, particularly Italy and Spain. The money banks are not investing in German bonds is being parked for punitive interest rates at the European Central Bank, starving the finance system of liquidity.
Analysts said the German auction reflected investor readiness to pay a premium for the security of German bunds.
“For a long time, it wasn’t possible to imagine things would get this far,” said Kornelius Purps of Unicredit. “But in such insecure times the principle of return of money trumps return on money.”
Analysts say the negative yields are unlikely to last indefinitely, but the current situation means Berlin can shave some loose change off its borrowing requirements this year. German borrowing is set to rise beyond the €35 billion already anticipated when the capital pay-in for the permanent rescue fund (the European Stability Mechanism) is brought forward – possibly to July. In a further sign of German economic strength, latest figures showed exports up 2.5 per cent in November, generating a trade surplus of €15.1 billion. Data out tomorrow is expected to show that Europe’s largest economy grew by three per cent in 2011. Leading the charge are Germany’s car manufacturers, all reporting growing demand despite continued economic uncertainty.
BMW in Munich expects 2011 profits to be up strongly, while Porsche is reporting demand for its revamped 911 sports car, up 30,000 units in the US alone. At Daimler, meanwhile, a record 988,000 Mercedes are set to roll off the conveyor belts this year.
