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Demand to lend Germany at short end of curve reaches new record

Demand for German short term bonds have never been higher. Investors ran for the safety of German bonds as they try to gauge, what could be the global implication of massive devaluation of Chinese Yuan by Peoples bank of China (PBoC).

German 2 year bond yields tumbled to new record low today at -0.29% yield. Investors chose to forgo some of the cash in return for safety.

Why invest in negative yield?

  • While investing or parking money at negative yield, investors are certain of the maximum loss, which would be -0.29% if held till maturity for German two year. It is small price to pay, in a bid to avoid uncertainty.

Another school of thought -

  • With Yuan devaluation, China will be exporting some of its deflation across the world, which has brought out the deflationary bugs.
  • Moreover, Euro zone recovery might slow down amid all out currency war.
  • Market Data
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