Sovereign Bond Auction Fizzles in Germany
Germany has been considered a safe haven of financial stability amid the ongoing euro crisis — but that may be changing. Growing mistrust from investors seems apparent after what has been described as a “disastrous” government bond auction on Wednesday. Just two-thirds of the German bonds sold, leaving analysts concerned but not panicked.
Investors seem to have lost their taste for Germany’s once much sought-after government bonds. At an auction on Wednesday of the country’s 10-year bonds, one-third went unsold according to the German Finance Agency, which manages the nation’s debts. The federal government had initially intended to sell bond issues worth some €6 billion (around $8 billion), but managed to garner just €3.89 billion.
The leftover issuing volume of some €2.35 billion will now be offered on the so-called secondary market, where bonds already in the process of maturing are sold. Disquiet on the markets likely led to the drop in demand, the German Finance Agency said Wednesday. “The result of today’s auction reflects the exceedingly nervous market environment,” a spokesman said, adding that Germany still does not face a financial shortfall.
Analysts, on the other hand, weren’t quite as relaxed about the situation. “This is a complete disaster,” said Marc Ostwald, an analyst at Monument Strategies. Another industry expert, Ralf Umlauf from Helaba, a government bank in the states of Hesse and Thuringia, called the auction a “vote of no confidence against the entire euro zone.” The event should be seen as a warning signal that shouldn’t be minimized, the analyst said. “A change in sentiment has taken place,” Umlauf told SPIEGEL ONLINE. In particular, foreign investors have become distrustful, he added. “They associate the investment in sovereign bonds with the risk of the euro zone,” he said.