Germany’s historic bond issue ends in embarrassing disaster

Yesterday the attention for this event already rose, and today it was the time. For the first time in history, Germany sold a 30-year government bond with a coupon of 0.00%. For the first time, no more interest payments at all. And that with a term of 30 years! What madness. But that’s the way it is, we live in mad times!

And today the result. The issue yield is -0.11%. Such a good deal for the Treasury Minister. But first something different. Why do we write in the title of this article of an “embarrassing disaster”? Well, Germany wanted to sell a volume of 2 billion Euros. And the demand volume of institutional investors (here the details) was only 869 million Euros. What an embarrassment. The federal government has probably taken it upon itself to do so. Either the investors were -0.11% yield for 30 years then nevertheless too little… or the speculators among the institutional investors do not believe that the prices on the bond market can still further rise. After the issue on the free bond market they do not see the possibility to sell these securities at even higher prices (further falling yield).

Let’s get down to the profits for the federal government. With a volume of 824 million Euros ultimately sold, the selling price was 103.61% (bond prices always quote in percentage points). Because the bondholder receives the nominal value of 100.00% back in 30 years, but has to pay 103.61% today. This results in a negative yield. With 824 million Euros of nominally sold volume, the German government has actually collected 853.74 million Euros today. Thus the Ministry of Finance is making a profit of 29.74 million Euros from this sale with immediate effect.

Olaf Scholz is happy about that. But the experts at Finanzagentur Deutschland Gmbh, who regularly carry out the emissions for the federal government, may perhaps see: Ohhhh, the limit has been reached? Only 869 million Euros demand with 2 billion Euros supply. The next time perhaps nevertheless a net yield of 0,00%, or perhaps a mini mini plus of 0,03%? Only such a suggestion on our side. But what do we already know?

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