Posted on 08/21/2019 7:05:04 AM PDT by Leaning Right
LONDON/BERLIN Aug 21 (Reuters) - Germany sold 30-year bonds with a negative yield for the first time at an auction on Wednesday, a milestone for a fixed-income market where the entire curve now yields less than zero.
The euro zone’s benchmark bond issuer sold 824 million euros of the new long-dated bonds against a target of 2 billion euros, with an average yield of -0.11%. The coupon on the bond was set at 0% earlier this week.
(Excerpt) Read more at reuters.com ...
If anything....they probably would have to raise all taxes by 20-percent in the next five years, if they intend to carry out even ten-percent of their ‘promises’.
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They don’t have to raise taxes or cut spending because they have negative interest rates. They have a balanced budget rule that they’ve followed and look at the poor result.
Cutting taxes would raise rates and get their economy growing.
Granted, some people or investment firms will buy those negative interest bonds because they need an on-paper loss for tax purposes, but that is a pretty narrow needle to thread.
“The argument is that holders will make money by selling the bond if interest rates go up.”
No it’s just the opposite. They believe that the interest rates will go even lower (more negative) - that’s when they would sell and make money.
“Below 0%, investors are essentially paying governments to hold their debt — a move that can be profitable if investors are willing later on to pay more for holding government debt.”
So for example, the guy that bought the bond when the rate was -0.05% can now sell it for a profit now that the rates are -0.11%.
Now you're exporting money out of Germany and the EU. What are the tax ramifications of that?
[Now you’re exporting money out of Germany and the EU. What are the tax ramifications of that?]
Germans are control freaks.. I know, I am part German. ; )
The world s going crazy!!!
Bingo!!!!
We are in unchartered waters. Anyone who says they know what's coming is lying.
” So you put your money in Government Bonds, on the theory that in 30 years you’ll get your principal back.
So in essence, a negative yield bond is you paying the government to hold your money for you.”
BINGO!! We have a winner!!
It sounds like just about any investment would be better than this: real estate, stocks, American bonds, gold and silver, even collectibles like autos, antiques, etc.
I think my employer bought some of those with my 401K … or at least it seems like it sometimes.
That scamp Eddie Haskell is now in charge of the EPA. CAFE standards? That was Eddie’s idea!
No it’s just the opposite. They believe that the interest rates will go even lower (more negative) - that’s when they would sell and make money.
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Correct. I caught my error after posting.
This ‘debt-brake’ law (been around since 2009) is being seriously challenged by economists around Germany and is brought up monthly as a future problem. For the entire past decade of the debt-brake existence....business was booming, unemployment rates were going down, and tax revenue made the Finance Minister almost grin.
The general view is that the debt-brake wasn’t made to handle a serious recession, and high unemployment rates. If the GDP were to slide...they’d have to go and find various budgets to cut, and things like bridges, roads and infrastructure would be the first thing likely cut.
I can’t think of any good reason to buy that.
Of course it went poorly. What normal person would buy such a thing?
They never heard of gold? Silver.
Try cash under the mattress.
I found an article saying that Germany ran a budget deficit in 2010 of 4.3% and their economy did very well.
Another article said their economy did well in 2011 because of a weak Euro and their budget deficit went down to 1%.
In 2012 their economy stagnated and grew less than 1%. That’s all I really need to see and it’s pretty much what I expected.
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