France Joins Germany to Sell T-Bills At Negative Yield
9 July 2012, by Emese Bartha (Wall Street Journal)
http://online.wsj.com/article/SB10001424052702303343404577516602196927274.htmlFrance joined a handful of euro-zone countries Monday in selling short-term debt at negative interest rates as investors seek alternatives to expensive German and Dutch debt. Earlier in the day, Germany's six-month borrowing costs again turned negative at an auction, after the European Central Bank slashed its key policy and deposit rates to unprecedented levels last week.
The negative yield at Monday's German auction, the lowest on record in this maturity segment,
means that investors effectively pay the German state for the privilege of holding its debt.
The Dutch State Treasury Agency had already sold Treasury Certificates, or short-term debt, at negative yields.
Now the French government is doing so as well.
Germany sold €3.290 billion ($4.041 billion) of six-month Treasury bills, known as Bubills, at an average yield of -0.0344%.
This is not only below the 0.0070% reached at the previous auction June 11 but also lower than the -0.0122% seen at an auction Jan. 9.
France sold €3.917 billion of 13-week Treasury bills at an average yield of -0.005%, down from 0.048% a week ago, and it sold €1.993 billion of 24-week Treasury bills at an average yield of -0.006%, down from 0.096% last week.
Yields on France's 50-week Treasury bills also came very close to zero, being allocated at an average yield of 0.013%, down from 0.163% a week ago.
The German Finance Agency's EUR4 billion offer attracted €5.480 billion in bids.
The solid demand signals that many investors are still willing to forego returns in exchange for safety.
While German yields have turned negative several times in the secondary market, this is the second time so far this year that borrowing costs were negative at a German debt auction.
The ECB cut its key policy rate to a new low of 0.75% from 1% Thursday, and reduced its deposit rate to zero at its rate-setting meeting last Thursday, largely in line with market expectations.
Several large money-market funds restricted or closed their European funds to new investments after the ECB cut the deposit rate to zero, as they have struggled to provide returns to investors.
"This emphasizes the unforeseen effects of the extreme monetary policy actions that are currently being carried out by the ECB," said Rabobank's fixed-income strategists.
