It’s magic. It almost seems like, I dunno, it’s too good to be true.
German government makes billions from debt thanks to negative rates – The German government made billions of euros from debt issuance this year thanks to negative interest rates on its securities, according to a letter, seen by Reuters, from Finance Ministry State Secretary Florian Toncar to a left wing lawmaker.
That means “punitive interest rate” and refers to a rates below zero.
It’s an accurate word invention. The ECBhas cut rates again and those who save are punished.
The German term “Strafzins”, or “punishment rate” is widely used in the country’s media to refer to interest rates below zero. And a day after the ECB cut rates for the first time since the spring of 2016, it is back in the news.
This is despite the fact there is an alternative German word for negative rates: negativzins (as Michael Steen, formerly of the FT and ECB global media chief, pointed out on Twitter).
Admittedly negativ also has . . . negative connotations. But the use of “straf”, or “punitive”, reflects a widespread perception across Germany that the ECB is penalising savers through its monetary policy.
Germany in Uproar as Negative Rates Threaten Saving Obsession – Germany’s overcrowded banking industry has long contended with sub-par profitability, but after five years of negative rates, lenders are running out of ways to offset the hit to earnings. With the country gearing up for regional elections next month, the ECB is an easy target for a country known for its risk-averse attitude to money and its habit of hording savings in checking accounts. At 2.35 trillion euros ($2.6 trillion), no other country in the euro area has a larger pile of retail deposits.
“These suggestions show how far the undesired side effects of the ECB’s negative rates stretch.”
Speaking of debt… Here’s the state of the state today, folks. If you’re not one of us, if you’re the German government, for example, you can actually make money with your debt.
The German state profited from incurring more debt in the first half of this year, a newspaper report showed on Monday.
State bonds issued with negative interest rates flushed around 1.5 billion euros ($1.68 billion) into federal coffers, as total interest spending dropped from 9.7 to seven billion, the “Bild” daily reported.
German government bonds with a maturity of up to 10 years currently carry a negative interest rate, which means investors, who would traditionally expect a return on their investment, actually pay to own them.
I’m gonna buy a mess of these. But like what will be my German Bund’s 10-year yield at -0.030 percent? I mean, will there still be any of my investment left?
“Nobody buys bunds at these yield levels thinking they are attractive. Demand for haven assets is being driven by fear of Brexit and growth concern. Investors are buying bunds as a hedge against uncertainty.”