Germany 2 year govt bonds -0.02%

[ZenOps]

http://www.bloomberg.com/quote/GDBR2:IND/chart

It appears that the negative interest rates that Germany was offering back at the beginning of the year was not an anomaly.

You can now buy 2 year government bonds and be guaranteed to lose money. If you understand money at all, it is a good buy for anyone in the Eurozone right now.

[Akumaz]

i cant really understand why this is a good buy =S,
can you explain why this would be a good buy for ppl in the Eurozone?

[Thomas Gabriel]

Originally posted by Akumaz
i cant really understand why this is a good buy =S,
can you explain why this would be a good buy for ppl in the Eurozone?

I'm assuming because a risk free rate of -0.02% is mostly just an inflation loss. The credit risk-weighted return on cash could be -10%. Although that would be a surprising number for Germany. But imagine if Cyprus was able to offer a 2 year AA bond 6 months ago at -0.02%. That'd be a great deal.

[sabad66]

Would you not be better off leaving cash under your mattress? I guess with these bonds you don't run the risk of losing it all if you get robbed....

[bob9979]

bonds yield is an indication of how secure the bond have the ability to pay back.
Sovereign bond shows how strong the economy of the particular country.

The higher the yield, the more credit risk is associated with the bond. we've seen some crazy 250% yield on Greek sovereign bond last year.

there is a huge demand on Germany bonds in Europe now, that's why the yield is negative. if shit likes Cyprus keep happening in Eurozone the yield will keep going south, the more premium you have to pay to buy these bond.


Originally posted by Thomas Gabriel


But imagine if Cyprus was able to offer a 2 year AA bond 6 months ago at -0.02%. That'd be a great deal.
I don't agree with you on this. if you buy a AA Cyprus bond 6 months ago, you are now in deep shit.

seriously, war can be an option.

[bob9979]

Originally posted by Thomas Gabriel


I'm assuming because a risk free rate of -0.02% is mostly just an inflation loss. The credit risk-weighted return on cash could be -10%. Although that would be a surprising number for Germany. But imagine if Cyprus was able to offer a 2 year AA bond 6 months ago at -0.02%. That'd be a great deal.

people who are buying the -0.02% bond is in the fear of their saving accounts will be subjected to a 40% write-off

[BigMass]

they're doing it on purpose to push people into risky assets and inflate bubbles to prop up this phony economy. House of cards, Ponzi scheme, pick your poison. It's just a bunch of technocratic pinheads that are using social/economic engineering to manipulate the economy. It's only going to work for so long before it implodes. It's all one big computer game for these guys until a few unemployed locals that just lost their house, families and can no longer feed themselves find out that chopping heads off with a guillotine is a fun way to pass the time

[ZenOps]

Originally posted by bob9979


people who are buying the -0.02% bond is in the fear of their saving accounts will be subjected to a 40% write-off


Yes.

The people who print the Euros have solidly put themselves on the side of paying the bondholders by taking from savers.

So even if you lose 0.02 percent, at least you do not have the risk of savings in a bank.

It is triply dangerous to have a stock trading account that comes back to a Euro currency based on a Euro bank. IE: In Canada it would be like TdWaterhouse coming back to a Iron Loonie dollar based on TD bank. There are many points of failure and seizure in that scenario.

Investing in companies in this climate should be private placement direct investment only, or you risk it all.

Caveat emptor.

[liquid1010]

The amount of crazy "reasons" in this thread are downright disturbing....... and now to the facts......

There has been discussions about this being a short-squeeze on German debt, or a hedge on deflation, but I find the comment below to be the most compelling I have read.....

"The answer is that the purchase of a German government bond, even with a negative yield, is an insurance against the break-up of the euro. A German government bond, which is later converted into “new Deutschmarks”, would, as a result of the currency effect, virtually increase in value overnight by 40-50% compared to currencies in the peripheral countries. An investor who considers the break-up of the eurozone a possibility can therefore use the purchase of Federal government bonds to hedge against this risk. If I assess the probability of a break-up at 5% and the resulting loss in value of my investment portfolio (Southern European countries) compared to German government bonds at 50%, then I can insure myself with an investment of 2.5% in German government bonds. Even if the yield expectation for this 2.5% is negative, this is cheap insurance."
- Guy Wagner, Chief Economist -

[ZenOps]

If the Eurozone starts falling apart and the global banker system with it, we may see a resurgance in Canada Savings Bonds.

Even though they are only 0.40% (or probably less) they are much more likely to be worth something compared to a digital number in one of the big 5 banks.

Canada Savings Bonds have never failed, even during wartime. Has anyone else noticed that the banks have not advertised CSB's at all? Thats usually the indicator that its time to start thinking about it.

[liquid1010]

Originally posted by ZenOps
If the Eurozone starts falling apart and the global banker system with it, we may see a resurgance in Canada Savings Bonds.

Even though they are only 0.40% (or probably less) they are much more likely to be worth something compared to a digital number in one of the big 5 banks.

Canada Savings Bonds have never failed, even during wartime. Has anyone else noticed that the banks have not advertised CSB's at all? Thats usually the indicator that its time to start thinking about it.

How do you figure? Random fear mongering.....?

The big 5 Banks in Canada are noted as some of best capitalized banks in the world.... and are among the only banks in the World that already comply with Basel III requirements (Europe and the US banks don't). In fact, all but one of the big 5 already has reserves over 8%.....

The Conservative Gov't has done a lot wrong, but their economic policy with regards to Canada's banking system has been very good in my opinion.

[BigMass]

Originally posted by liquid1010
The amount of crazy "reasons" in this thread are downright disturbing....... and now to the facts......

There has been discussions about this being a short-squeeze on German debt, or a hedge on deflation, but I find the comment below to be the most compelling I have read.....

"The answer is that the purchase of a German government bond, even with a negative yield, is an insurance against the break-up of the euro. A German government bond, which is later converted into “new Deutschmarks”, would, as a result of the currency effect, virtually increase in value overnight by 40-50% compared to currencies in the peripheral countries. An investor who considers the break-up of the eurozone a possibility can therefore use the purchase of Federal government bonds to hedge against this risk. If I assess the probability of a break-up at 5% and the resulting loss in value of my investment portfolio (Southern European countries) compared to German government bonds at 50%, then I can insure myself with an investment of 2.5% in German government bonds. Even if the yield expectation for this 2.5% is negative, this is cheap insurance."
- Guy Wagner, Chief Economist -
http://images.tribe.net/tribe/upload/photo/013/e00/013e009e-f1eb-4021-8884-b13e7f477588
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2012/1/13_Jim_Sinclair_files/King%20World%20News%20Jim%20Sinclair%205%3A10%3A2011.jpg

[ZenOps]

Originally posted by liquid1010


How do you figure? Random fear mongering.....?

The big 5 Banks in Canada are noted as some of best capitalized banks in the world.... and are among the only banks in the World that already comply with Basel III requirements (Europe and the US banks don't). In fact, all but one of the big 5 already has reserves over 8%.....

The Conservative Gov't has done a lot wrong, but their economic policy with regards to Canada's banking system has been very good in my opinion.

Canada is not an island. We have high exposure to the US banking system.

http://www.fdic.gov/bank/individual/failed/banklist.html

Before 2000, you could count the number of failed US banks on one hand.

[BigMass]

Originally posted by liquid1010


How do you figure? Random fear mongering.....?

The big 5 Banks in Canada are noted as some of best capitalized banks in the world.... and are among the only banks in the World that already comply with Basel III requirements (Europe and the US banks don't). In fact, all but one of the big 5 already has reserves over 8%.....

The Conservative Gov't has done a lot wrong, but their economic policy with regards to Canada's banking system has been very good in my opinion.

Canadian banks are a tag nut on a fly's ass. If the US has gas, the Canadian economy will have about as much of a chance as a fart in a windstorm

[liquid1010]

Bigmass.... take your tinfoil hat elsewhere.....


Originally posted by BigMass

http://images.tribe.net/tribe/upload/photo/013/e00/013e009e-f1eb-4021-8884-b13e7f477588


Let's deconstruct that absurd graph you have above. Essentially what it's showing is that $1 in 1913 is worth what..... around $.05 right now? If you do the compounding math, that equates to just shy of 5% inflation per year over a period of 100 years which included both World Wars and the great depression. How is this a staggering statistic? :banghead:

I do believe the US Monetary policy is beyond crazy right now, but your graph is absolutely and completely pointless.

[liquid1010]

Originally posted by BigMass


Canadian banks are a tag nut on a fly's ass. If the US has gas, the Canadian economy will have about as much of a chance as a fart in a windstorm

lol.... you're beyond ignorant. Their size is in direct proportion to the country the serve, and they have extremely strong balance sheets in comparison to the rest of the globe. If they fail (and there's always a chance), a whole lot else will fall apart prior to that.....

[liquid1010]

Originally posted by ZenOps


Canada is not an island. We have high exposure to the US banking system.

http://www.fdic.gov/bank/individual/failed/banklist.html

Before 2000, you could count the number of failed US banks on one hand.

I don't disagree with regards to exposure to the US.... but when Lehmann failed, and multiple other US banks were on the verge, Canadian Banks held up just fine. Keep in mind that was also prior to their newly elevated tier 1 capital requirements. Canadian Banks are amongst the first banks in the world to meet these new requirements.

In the US banks prior to the meltdown, even if capital ratios were met.... debt to equity and leverage were completely out of hand. Canadian Banks are nowhere near those levels....

[BigMass]

Originally posted by liquid1010
Bigmass.... take your tinfoil hat elsewhere.....
.

I stop reading at the first sign of ad hominem. Bye

[ZenOps]

Originally posted by liquid1010


I don't disagree with regards to exposure to the US.... but when Lehmann failed, and multiple other US banks were on the verge, Canadian Banks held up just fine. Keep in mind that was also prior to their newly elevated tier 1 capital requirements. Canadian Banks are amongst the first banks in the world to meet these new requirements.

In the US banks prior to the meltdown, even if capital ratios were met.... debt to equity and leverage were completely out of hand. Canadian Banks are nowhere near those levels....

The big banks only survived because the US decided to bail them out with printed money. There are many economists out there who believe it would have been better to let the underperforming and high risk banks fail, no matter how large. The US system has far too many small banks.

If there is another banking crisis in the US, they may just decide to take that route. There is no "law" that requires banks be bailed out or any depositors to be compensated $1 for any savings they may have there if they do go bankrupt.

In a global banking system, perhaps five for Canada is too many as well...

Fear is not always a bad thing, especially when the fear is warranted.

[effingidiot]

Originally posted by liquid1010


I don't disagree with regards to exposure to the US.... but when Lehmann failed, and multiple other US banks were on the verge, Canadian Banks held up just fine.

http://www.cbc.ca/news/business/story/2012/04/30/bank-bailout-ccpa.html

You've successfully qualified your opinion.

[Xtrema]

Originally posted by Akumaz
i cant really understand why this is a good buy =S,
can you explain why this would be a good buy for ppl in the Eurozone?

Because if you left it in Cypress, you may to take a 40% cut.

Then again, Russians found a way and got money out so the only one taking the cut is Cypress citizens.

http://www.zerohedge.com/news/2013-03-25/have-russians-already-quietly-withdrawn-all-their-cash-cyprus

[liquid1010]

Originally posted by effingidiot


http://www.cbc.ca/news/business/story/2012/04/30/bank-bailout-ccpa.html

You've successfully qualified your opinion.

Did you actually read that article, or simply the headline? Over half that money was in the form of guaranteed mortgages sold to the CMHC, which is very different than the agreements reached in the US, where the fed took on all sorts loans/derivatives.

There is a difference between providing liquidity support and a full-on bail-out. Don't take this as me saying that the CDN banks are perfect, and there's no need to worry. I'm simply stating that they are safer than most major banks....

[ZenOps]

Canadian Premium bonds changed the rules to make them more attractive last year.

http://www.csb.gc.ca/8086/canada-savings-bonds-program-changes-effective-october-2012/

Two main points being:

Canada Premium Bonds will be cashable anytime

The term to maturity will be shortened to three years

Come November, it should be a consideration for anyone who is paranoid about the banking system (rightfully so, governmental bonds are usually raided the absolute last)

Which at 1.00% first year 1.20% second year and 1.40% third makes it attractive as a *very slightly safer* savings than the 1.2% most banks offer anyhow, if you intend to hold for three years.

[Beerking]

Originally posted by liquid1010


lol.... you're beyond ignorant. Their size is in direct proportion to the country the serve, and they have extremely strong balance sheets in comparison to the rest of the globe. If they fail (and there's always a chance), a whole lot else will fall apart prior to that.....

You're a hopeless sheep.

ITs called shadow banking and the worldwide derivative sheet is close to $1Quadillion. Why do you think Cyprus is such a big deal, there will be another AIG moment and Canada is not immune.

go back to sleep.

[liquid1010]

Originally posted by Beerking


You're a hopeless sheep.

ITs called shadow banking and the worldwide derivative sheet is close to $1Quadillion. Why do you think Cyprus is such a big deal, there will be another AIG moment and Canada is not immune.

go back to sleep.

LOL. Not to belabor the point.... but your post has absolutely zero substance. You grab a phrase like "shadow banking" because it sounds ominous, but you actually have no idea what it is or what functions it serves. Even if you did.... how does it relate to the German bond yields?

The global derivative market is actually valued at nearly $1.5 Quadrillion.... and is way out of hand.