Yields on German three-month Treasury bills, or Bubills, slipped close to zero

Discussion in 'Wall St. News' started by ASusilovic, Apr 30, 2010.

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    That’s the yield on the three-month German bill, and it is has been verging on the negative in recent days. In fact it reached a low of 0.09 on April 20 — the day Bundesbank President Axel Weber said Greece may need more bailout money than initially expected. That was its lowest since 1993.

    It’s currently hovering around the 0.19 mark, as at pixel time.

    Bloomberg is atrributing the decline to a flight-from-risk:

    The yields offered on German three-month Treasury bills, or Bubills, slipped close to zero as concern the Greek debt crisis is spreading across the euro area lured investors to the region’s safest securities.

    The decline in short-dated yields echoes the slide in U.S. Treasury bills after Lehman Brothers Holdings Inc. failed in 2008. Yields were negative at that time, meaning investors lost money to ensure that their investment remained safe as they exited positions in riskier assets.

    There was some debate back in December 2008 – when rates on three-month US T-bills first turned negative — as to whether the move was down to real risk aversion or end-of-year window dressing. T-bill rates went negative again in November 2009, and the discussion again cropped up.

    Either way though, there’s a preponderance of Lehman-Greece comparisons now being drawn in the eurozone.

    To wit, an extra-alarming one from Friday’s FT:

    Many European banks have become shut out of the international lending markets because of continuing concerns over Greece, sparking fears that some could collapse as they run out of cash . . . “Recall how in March and September 2008 interbank lending began to show signs of stress as counterparty risk jumped, with banks unwilling to lend to their peers for fear that counterparties were excessively burdened with illiquid assets such as CDOs,” [UBS currency strategist Brian Kim] said. “Replace CDO with Greek or Portuguese bonds, and this is the risk that now looms.”


  2. LeeD


    Very interesting (and timely) post. Thanks!

    What is the best way to short German bills? Futures?
  3. http://www.eurex-bonds.com/