They don't know what a tracker mortgage is...

RUCKING FETARD

France borrows for first time at negative rates

The French government borrowed for the first time at negative rates on Monday, meaning that investors were willing in effect to pay to hold French debt as in Germany.


The French government raised almost 6.0 billion euros ($7.4 billion) in short-term debt at minus 0.05 percent and minus 0.06 percent as rates for Spain spiked to the danger level of 7.0 percent.
Denmark, France, Germany and the Netherlands have all attracted investors willing to pay to hold their debt.

Who "invested" here? And why would they for no return???

delad

I'd like an explanation for this as well, what on earth is going on here?

Mr_Roger_Bongos

My answer isn't what i know to be fact, just my understanding.

The key is 'short-term debt' (i.e. bills under 1 year in duration).

Banks/Hedge Funds etc need to manage their Euro exposure. Germany has benefited from negative rates for a few months now. As investors books become German bond heavy (in the short term), they look to diversify slightly to what's seen as the next "safest" bet in the Eurozone - France.

It could also occur due to the debt auctions of both countries, with investment in French debt seen as less loss-making than even more negative rates in Germany.

Finally with Spanish yields again tipping over 7% recently, in the fallout of an ECB rate cut, they'll choose to park money in France rather than the other core countries, Spain and Italy.

EDIT - To simplify further - A bond auction is demand and supply. Demand for French short term debt outstrips supply and thus if you're bidding on the auction, you'll bid as low and in some cases negatively, to ensure you get the bonds your after.

euroboom13

could be a currency play..dollar(or china) very strong against euro....put ur dollars in french bonds and in one year, buy back your dollars at a weaker rate....big return if you foresee a weak dollar next year:) .....add leaverage and retire....

thats what make`s sence to me

euroboom13

1m french bonds cost $1.22m
return of -0.5 in 1 year =0.95m euros

if $ rate goes from 1.22 to 1.6.....ur 0.95 rturns to dollars as $1.52m/ profit of $300,000 per $1,220,000 investment

25% per annum:cool: