By MoneyMorning.com.au
“Germany failed to get bids for 35 percent of the 10-year bonds offered for sale today, propelling borrowing costs in Europe higher and the euro lower on concern the region’s debt crisis is driving away investors.” – Bloomberg News
In simple terms, Germany’s central bank only sold €3.9 billion-worth of German bonds out of €6 billion offered to the primary market. The rest was sold in the secondary market.
(The primary market gives a few select banks first bite before everyone else can have a go in the secondary market.)
But this isn’t the first time Germany hasn’t sold all its bonds. According to Bloomberg, “Six of the last eight bond sales by Germany have been ‘technically uncovered’, with fewer bids than the maximum amount on offer.”
It’s a great irony. The buyers of German bonds in the primary market are the same mob that wants Germany to bail out the rest of the European Union to prevent its collapse.
So while the banks are keen on bailouts, they don’t want to pay for it. And why should they? With moral hazard out the window, the banks figure Herr & Frau Taxpayer will come good and everything will be fine.
[Ed note: if you want to know the impact of the bodged German bond sale on the markets, check out Murray Dawes’ latest free stock market update video now].
But what the heck.
That’s Europe. We’re… 14,000 kilometres away in Australia – and China’s economy will bail us out… right?
Cheers.
Kris.
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