Germans selling 2-year govt. notes with 0% yield
Germany is planning on issuing $6.7 billion in two-year government notes, known as Schatz, that will pay nothing in interest, according to the Wall Street Journal.
While this is great news for German taxpayers — the government will pay nothing on its debt — it’s an ominous sign for the German economy and the Eurozone in general.
Rates have been sagging all across Europe.
What’s keeping Europe’s rates down:
- Deflation worries. Inflation rose at a 0.4% annual rate in Europe in July, well below the European Central Bank’s target of 2%. Deflation is a period of falling prices that tends to persist for a long time. Consumers delay purchases, figuring that prices will fall, and employers cut back on wages.
- Russia worries. Germans probably aren’t worried about being invaded by Russia, but Russia’s incursions into the Ukraine have made investors much more inclined to worry about the return of their money than the return on their money.
- Stalled economy. The 18 nations that use the euro as currency saw 0% gross domestic product growth in the second quarter, raising fears of another slide into recession.
Source: Usatoday
