Ed Driscoll

Backward Ran the European Treasuries Until Reeled The Mind

“France sells bonds at negative interest rate,” AP reports, with a seemingly Orwellian lede:

France’s government has sold short-term bonds at negative interest rates for the first time, a sign of investor confidence despite concerns about French debts and the wider eurozone.

One reason for the negative rates is that France is among the more desirable basket-cases to park money in Europe. Or as AP writes, investors are flocking “to the perceived safety of Europe’s larger economies.”

This also includes Germany, which Bloomberg News reported a month ago was experimenting with a zero-interest bond of their own:

Germany’s 10-year bunds, Europe’s benchmark government debt securities, headed for a seventh weekly advance, driving yields to an all-time low. Austrian, Dutch and French yields also fell to records as a report confirmed euro-region manufacturing contracted in May…

The German two-year yield slid to as low as minus 0.002 percent, the first time the rate on the securities has been negative, according to data compiled by Bloomberg, and was at 0.005 percent as of 9:03 a.m. London time. The price of the zero percent note due in June 2014 was at 99.99.

As Joel Pollack of Breitbart.com noted at the time, “That means investors are so desperate for security that they are willing to accept less money at the end of ten years than they invest today,” paying Germany, and now France for the privilege of holding their money.

Related: Elsewhere at PJM, Mike McNally on “The Libor Scandal: History’s Largest Market Fraud?”