The German Bundesbank has just sold zero interest 2 year sovereign bonds – but could have sold double amount.
Tuesday the Danish Central Bank sold to year bonds to negative interest rate of .08%!
The Danish example has precious little with international flight towards quality. It is probably more a vote of no-confidence to the flexible rate mortgage bonds issued by the Danish mortgage banks.
Danske Bank has received an EFSF loan of 41 billion DKK or 5 billion EUR at an interest rate of 1%. Another (probably BRF) has received emergency credit extension of 2 billion EUR from the Danish CB at an interest rate of .7 %.
It is indeed a cruel world when you can’t sell your bonds – not even to yourself!
The sub-German interest rates are presumably due to short term loans interbank loans reaching maturity – the poor investors don’t know where to stack up the money – so they put them into sovereign bonds. Flexible interest mortgage bonds? Are you insane? Do you think I’m Greek?
But it is an indicator for a serious banking problem in Denmark. Which makes it even stranger that investors are willing to purchase bonds at such low rates.