BRUSSELS — Throughout Europe’s debt crisis, northern European leaders have often said they will not stand for taxpayers having to fork out for other countries’ problems, and the notion of “taxpayer-funded bailouts” has taken root.
Yet despite three-and-a-half years of debt and banking turmoil, with bailouts totalling more than 400 billion euros, northern eurozone taxpayers have not actually lost a cent.
By Daryl Montgomery: Global interest rates continue to diverge, with rates rising in the troubled eurozone countries and falling to new lows in Germany and the United States. The same sort of divergence took place during the 2008 Credit Crisis with yields on safe-haven governments falling markedly, while yields on low-grade corporates soared.
The business models of German financial institutions depend critically on the presence of positive nominal interest rates. The International Monetary Fund noted in its latest Financial Stability Report that the pre-tax profits of German and Portuguese banks are most affected by negative rates.
NEW DELHI: Though tax-free bonds are long duration products, there is no need for 'short and medium term' investors to shy away from them, for there are several trading opportunities here. First, they can flip these tax-free bonds also on the listing date for short-term capital gains, just like they do in any other equity IPO. For example, the previous issues by NTPC, PFC and REC got listed at a premium of around 5%.
Public debt levels are rocketing in almost every country of the eurozone periphery. Debt ratios are already crossing the point of no return in Portugal and Italy and are nearing the danger zone in Ireland.
The latest figures from Eurostat are shocking even to those who never believed that combined fiscal and monetary contraction – made worse by bank curbs – could have any other result than a faster rise in debt trajectories.
One week back, the U.S. Treasury Department announced it would start auctioning off two-year floating rate notes – either later this year or early next year. The news marked the first new financing product from the U.S. government in more than 15 years since TIPS or Treasury Inflation-Protected Securities were introduced in 1997.