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07-01-2009, 11:23 PM

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Investors shun German bond auction

By David Oakley

Published: January 7 2009 13:30 | Last updated: January 7 2009 13:30

Investors shunned one of the most liquid and safest assets in the world on Wednesday as a German bond auction failed in a warning for governments seeking to raise record amounts of debt to stimulate their slowing economies.

It is the first eurozone bond auction of the year and an ominous sign of potential trouble ahead for governments around the world, with an estimated $3,000bn expected to be issued in sovereign debt this year – three times more than in 2008.

The auction of 10-year bonds failed to attract enough bids to reach the €6bn the government wanted to raise. Although a number of German bond auctions failed last year, it was almost unheard of before the credit crisis.

Meyrick Chapman, a fixed-income strategist at UBS, said: “When a German bond auction fails, then that does suggest there is trouble ahead for governments wanting to raise money in the debt markets.

“There was certainly a supply/demand imbalance because of the large amount of issuance in the last quarter of 2008 and the large amount due in the coming months. Before the financial crisis, German bond auctions just did not fail.”

Although government bond yields are trading at historically low levels, because of fears of deflation and investor demand for safe government paper in an uncertain climate, the failed German auction is a sign that appetite for these bonds is starting to diminish.

A number of countries, including the UK, Italy, Spain, Austria, Belgium and the Netherlands, have either struggled to sell bonds or been forced to cancel debt offerings because of a lack of demand.

The UK successfully sold £2bn in gilts due to mature in 2038 on Wednesday.

However, Robert Stheeman, chief executive of the UK Debt Management Office, warned last month that the ÜK government could also struggle to sell bonds because of the vast amount of bond issuance in the pipeline.

The UK is planning to raise £146bn in bonds this financial year – three times more than last year.

From:

FT.com / Markets - Investors shun German bond auction

Oh dear. Inevitable really, I would lend Governments the buttons on my shirt at this time...

07-01-2009, 11:23 PM	#1065 (permalink)
bkkandrew Guest Posts: n/a	In a sign of thisngs to come... . Investors shun German bond auction By David Oakley Published: January 7 2009 13:30 \| Last updated: January 7 2009 13:30 Investors shunned one of the most liquid and safest assets in the world on Wednesday as a German bond auction failed in a warning for governments seeking to raise record amounts of debt to stimulate their slowing economies. It is the first eurozone bond auction of the year and an ominous sign of potential trouble ahead for governments around the world, with an estimated $3,000bn expected to be issued in sovereign debt this year – three times more than in 2008. The auction of 10-year bonds failed to attract enough bids to reach the €6bn the government wanted to raise. Although a number of German bond auctions failed last year, it was almost unheard of before the credit crisis. Meyrick Chapman, a fixed-income strategist at UBS, said: “When a German bond auction fails, then that does suggest there is trouble ahead for governments wanting to raise money in the debt markets. “There was certainly a supply/demand imbalance because of the large amount of issuance in the last quarter of 2008 and the large amount due in the coming months. Before the financial crisis, German bond auctions just did not fail.” Although government bond yields are trading at historically low levels, because of fears of deflation and investor demand for safe government paper in an uncertain climate, the failed German auction is a sign that appetite for these bonds is starting to diminish. A number of countries, including the UK, Italy, Spain, Austria, Belgium and the Netherlands, have either struggled to sell bonds or been forced to cancel debt offerings because of a lack of demand. The UK successfully sold £2bn in gilts due to mature in 2038 on Wednesday. However, Robert Stheeman, chief executive of the UK Debt Management Office, warned last month that the ÜK government could also struggle to sell bonds because of the vast amount of bond issuance in the pipeline. The UK is planning to raise £146bn in bonds this financial year – three times more than last year. From: FT.com / Markets - Investors shun German bond auction Oh dear. Inevitable really, I would lend Governments the buttons on my shirt at this time...