January 9, 2012
While many euro-zone nations are struggling to obtain credit, investors are practically throwing money at Germany. The country on Monday raised almost 4 billion euros in six-month debt at a negative interest rate. In effect, investors paid Germany to be able to lend it money. The move highlights the economic imbalances in crisis-ridden Europe.
Investors in Europe are so worried about the euro crisis and so desperate to find a safe haven for their cash that they decided to forego an interest rate, and even paid a premium, for the privilege of lending Germany money on Monday.
The auction of six-month German government bills on Monday produced a negative interest rate. Even the Federal Finance Agency, which manages Germany's debt, was astonished. "That has never happened before," said a spokesman.
The average rate amounted to minus 0.01 percent. The auction generated €3.9 billion ($4.9 billion). Demand for the securities was so high that the sale was 1.8 times oversubscribed.
In December, Germany had managed to place paper at a tiny interest rate of 0.001 percent in an auction that was 3.8 times oversubscribed. Germany isn't the first country to receive a premium from investors. Denmark too was recently able to auction bonds for which the government will have to pay back less than it borrowed.
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