Germany's Bundesbank revealed that it had only sold €3.644 billion in new 2% 10- year bonds at an average yield of 1.98%, which has left some market participants frothing at the mouth.
Marc Ostwald, strategist at Monument Securities responded with:
I cannot recall a worse auction, only €3.889 Bln of bids in total for a €6.0 Bln auction, and this is the new 10yr benchmark, and that is a cover of 0.65x. IF Germany can only manage this sort of participation, what hope for the rest. YIELDS are at completely the wrong level. Disastrous 10 year Bund action - so much for safe haven demand!
The surplus will be of course be held by the Bundesbank and will, or it plans to at least, sell the remainder again soon.
Market sentiment seems to have hit a new low, as Eurozone officials clearly have not quashed fears of sovereign debt crisis contagion reaching the Eurozone linchpin - Germany.
Furthermore, I am sure the following remarks by European Central Bank board member Jürgen Stark, from a speech at Ireland's Institute of International and European Affairs in Dublin the the other day, didn't help either:
[When talking about joint euro-area bonds]
“Eurobonds, even if they’re called ‘stability bonds’ won’t solve the sovereign debt crisis in Europe, because they don’t tackle the structural problems some countries are facing,” Stark told reporters in Dublin. “Eurobonds seem to be feasible at a later stage, but only after the transfer of sovereignty.”
[When talking about the contagion spreading]
"The sovereign debt crisis has re-intensified and is now spreading over to other countries including so-called core countries. This is a new phenomenon. The sovereign debt crisis is not only concentrated in Europe, most advanced economies are facing serious problems with their public debt."
Meanwhile, Jean-Claude Juncker, Luxembourg Prime Minister and president of the EuroGroup- revealed to General-Anzeiger, a German newspaper:
Germany’s debt level is a “cause for concern,” Luxemburg Prime Minister Jean-Claude Juncker told the General-Anzeiger newspaper. “Germany has a higher debt than Spain,” Juncker was quoted as telling the Bonn-based newspaper in an interview to be published tomorrow. “The only thing is that no one here wants to know about that.” While Greece is on the right path to consolidate its budget, it’s not yet time to “see light at the end of the tunnel,” Juncker was cited as saying. If Greece were to leave the euro, it would create a “disastrous scenario,” he said.
- Euromoney Skew Blog