Thursday, January 12, 2012
German short rates negative
The German short-term ates have turned negative sending an important signal on credit risks in the Euro-zone. Market rates have been negative since before Christmas but now the German government can auction bills and receive the full benefit. When rates turn negative it is not a positive signal of economic or financial health. It is saying that investors in the Euro-zone do not want to hold cash instruments in other countries at any cost. They do not wnat to hold it any bank in Europe. They are willing to pay the German government to hold their wealth. It also states that there are limited opportunities in Germany.
This is flight to safety taken to the next degree.