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.
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.
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.
The euro has risen almost 2% against the US dollar thus far this year, while the yen has fallen about 4.5% against the greenback. Beneath this divergence may be a common consideration: Interest rate developments.
We recently showed 220 years of US Treasury bond yield history but all too often, the average investor is unfortunately unaware of the relationship between bond yields (interesting on a relative-value perspective) and bond prices (the thing that matters for your portfolio's returns).
FOR almost eight years Jean-Claude Trichet has been the public face of the euro and a reassuring presence to steady nerves during the financial crisis of 2007-09 and the euro area’s sovereign-debt tribulations over the past year. But the French president of the European Central Bank (ECB) will step down at the end of October. A behind-the-scenes struggle between the 17 euro-area states over who will succeed him in the world’s second most important central-banking job burst into the open this week as the German front-runner ruled himself out as a candidate in surreal fashion.
Germany will for the first time sell two-year bonds that won't make scheduled interest rate payments, a ringing endorsement of the safe appeal of German debt and a reflection of increased market nervousness over the composition and direction of the euro zone.
Carl Dincesen submits:The offering statements for the State of California’s most recent bond issues remind me of New York City’s for the sale of general obligation bonds and notes in 1974. Then, the City's short-term debt had no source of funding other than issuing new notes to retire the old. A few months later, the market refused to accept additional paper.