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Germany for First Time Sells 30-Year Bonds Offering Negative Yields

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Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#241

Post by lbotos »

czbond wrote: post #204
fourstar wrote: post #3

Those of you (US) with large stock/cash positions: what are you doing to weather the (inevitable) storm? Feels like we’re in the doom and gloom media phase. I suspect lots of people will start forgetting within the next 6 months in which the stock market will go sideways, until the next catalyst which is the US election cycle.

If you have stock gains that you need, and can't live without - consider your exit price, and perform proper portfolio maintenance. Recession indicators have been in play for about 2 years. If nothing else, be much more aware of your high downside risk - and at least scenario model if we go down to multi-decade lows. Specifically in any items with negative EPShare, or not necessities. We're in the cycle now that hits…

> House prices will de-value enough, so don't buy property for the next 1-3 years.

I don't follow. Are you saying don't buy until till the drop or, don't buy when it drops?

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#242

Post by whatok »

kovek wrote: post #239
logicallee wrote: post #186

Earlier quoted context omitted.

>- Many financial institutions are required to hold a certain percent of portfolio in safe assets. German bunds are among the safest in the world. Can you explain how this can possibly beat cash? If I say to you "I'll let you pay me ten cents to hold onto your $100 bill for a while, and give you a paper showing the obligation to repay your $100" (the meaning of a negative yield bond), how can the offer to let you pay…

A lot of commentators are discussing the drawdowns of storing cash bills. However, who buys bonds by paying with physical cash bills? Most of us have a number in our bank account that reflects some sort of wealth? (Ownership of a security elsewhere or an I Owe You?) People with a salary directly deposited and big companies do not need a bank to store their physical cash bills. I’m still trying to understand how this…

The ECB charges banks -0.40% to deposit money with them. These bonds are currently yielding -0.14%. Rates are not low enough to the point where physical cash is a thought. Rough estimates are a deposit rate of -0.75% where you would make more by holding physical cash.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#243

Post by ThrustVectoring »

sunseb wrote: post #38

Do you think it's a good idea to put some savings in gold?

The stereotypical HN reader (age 20-40 tech professional) should have three to six months of salary in cash (interest-bearing savings/checking/money market account), rest in low-cost equity index funds (I use 60% VTI / 40% VXUS).

Gold is, IMO, a disaster preparedness thing you buy after purchasing a shotgun, ammunition, and a month's worth of canned food. The main use case for gold is as highly portable physical wealth - in highly messed-up situations, you retain at lease some ability to engage in limited amounts of commerce to get yourself to a more stable situation.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#244

Post by cududa »

danieltillett wrote: post #234
docker_up wrote: post #196

Where can I put my money to take advantage of this? Gold? or just US treasuries?

Gold miners. With physical gold you have to worry about storage, but gold miners solve this problem. The gold miners have run pretty hard already, but the developers (those building a new gold mine) have not yet moved that much.

Both having gold stored somewhere and gold mines assume in the event of the collapse of civilization they’d leave the assets as is.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#245

Post by marvin »

adventured wrote: post #102
gzu wrote: post #27

I’m starting to entertain the idea of a massive bubble in bonds. Is inflation really never going to show again? I can’t understand why anyone would want to hold a fiat currency for 30 years for no return. Is it due to portfolio theory where the assumption is stocks and bonds yields have inverse correlation and the way to manage risk is to have a correct ratio? Due to global QE there is too much money floating without…

> Is inflation really never going to show again? In developed economies money is being removed nearly as fast as it's being added, in the form of going into the blackhole of low to negative yielding paper. It's removing a present ~$17 trillion of capital that could otherwise be sloshing around pressing inflation higher. That's an extraordinary amount of money that has largely been rendered non-impacting. There are on…

I still don't understand this at all. Is all this money that's being parked in almost no-yielding bonds just going to stay there forever, never to be used?

What does this say about the state of the economy or the expectations/psychology of whomever buys them?

There's either something very hard to understand that's happening to the world economy, or it's just a strange phenomenon that people pretend to understand but don't.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#247

Post by umeshunni »

tempestn wrote: post #226
toast0 wrote: post #195

Earlier quoted context omitted.

Holding cash usually means putting it in a bank account. The banks are going to put a significant portion in their country's central bank; the European central bank and member central banks are currently charging banks to store money; at large balances, those banks will charge customers. Now, you could put cash into a USD account at a US bank, where interest is still currently positive, but if you were storing Euros,…

Of course you could take physical cash and put it in a safe or something, but that doesn't scale well. Although maybe it does suggest a lower limit on negative interest rates, where it would actually be cheaper to store large amounts of physical cash...

You have to buy a safe, you have to have a location to store it, you need to secure the location. You need to ensure that the safe is temperature and humidity controlled, so that the currency doesn't mold, rot etc.

These costs add up. Once you've done all of those things, you're essentially a bank.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#248

Post by wcoenen »

whatok wrote: post #240
wcoenen wrote: post #233

Earlier quoted context omitted.

This would explain negative bond rates down to -0.40%. Because if you need to park a very large amount of euros safely, banks will start to apply that rate to your deposits so it's better to get any rate that is less negative. But curiously 10y german bund yields have recently hit -0.70%, and a couple other EU countries (France, Netherlands, Belgium) have also dipped below -0.40%. So it must be more than the negative…

I agree with all of this and probably could have phrased my original post better. My main point is that none of this is really possible without ECB rates being set where they are. Successful monetary policy requires multiple tools to be utilized and the deposit rate is the main tool that anchors everything else. QE in itself does not mean rates are going to be lower. You need central bank rates to also be low in orde…

> Rates didn't suddenly skyrocket after the ECB announced the end of QE.

That's because the QE program only stopped increasing the ECB's assets. When bonds that are held by the ECB mature, the equivalent amount in new bonds is still being re-bought.

I don't think negative deposit rates are really needed to have negative bond yields. You only need a bond buyer (e.g. the QE program) who drives up bond prices beyond the face value + all coupons. Negative interest rates were just a natural step in the progression of lower rates, zero rates, negative rates, and QE. The next thing will be some form of helicopter money.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#249

Post by danieltillett »

cududa wrote: post #244
danieltillett wrote: post #234

Earlier quoted context omitted.

Gold miners. With physical gold you have to worry about storage, but gold miners solve this problem. The gold miners have run pretty hard already, but the developers (those building a new gold mine) have not yet moved that much.

Both having gold stored somewhere and gold mines assume in the event of the collapse of civilization they’d leave the assets as is.

If there is a collapse of civillzation the last thing anyone is going to be worried about is their investment returns.

Gold as an asset class does well in periods of low real interest rates. All signs suggest we are going to be in a low real interest rate environment for sometime.

One of the nice things about investing in gold miners over just gold is in trying to find the best ones. There is real alpha in this as not all gold mines and gold miners are equal.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#250

Post by czbond »

lbotos wrote: post #241
czbond wrote: post #204

Earlier quoted context omitted.

If you have stock gains that you need, and can't live without - consider your exit price, and perform proper portfolio maintenance. Recession indicators have been in play for about 2 years. If nothing else, be much more aware of your high downside risk - and at least scenario model if we go down to multi-decade lows. Specifically in any items with negative EPShare, or not necessities. We're in the cycle now that hits…

> House prices will de-value enough, so don't buy property for the next 1-3 years. I don't follow. Are you saying don't buy until till the drop or, don't buy when it drops?

Each house market would act differently, some with a depressed recovery, some a whipsaw recovery. Watch your own market as the rule applies "last to go up, first to go down". Coastal markets will drop enough, interior less. Here is a good Case Shiller analysis of prices over time for markets. Buy when it gets near last periods low prices (do own analysis, don't rely on my flippant date mention though...).

https://wolfstreet.com/2019/08/01/housing-bubbles-chicago-da...

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