Monday, March 9, 2015

ECB Said to Lack QE Accord on Losses From Negative-Yield Bonds


Uh oh!  Story at Bloomberg.

The deal doesn’t address the losses implicit in purchases of the safest assets in the region. 
A central bank that buys a bond with a negative yield receives back less than it paid when the debt matures. 
An ECB spokesman declined to comment on the treatment of negative-yielding bonds under QE. 
Euro-area bonds accounted for about 80 percent of the $2.35 trillion of negative-yielding assets in the Bloomberg Global Developed Sovereign Bond Index as of the end of last month. Securities from Austria, Belgium, Germany, Finland, France, Slovakia and the Netherlands trade with negative yields. 
Buying bonds at negative yield is permissible in principle, as long as they trade above the deposit rate, currently at minus 0.2 percent, according to implementation details on the ECB’s website.

I hope someone at our US Fed is watching this as a tip-off on the issue that current procedures at CBs require a positive yield from CB owned financial assets at all times lest these people think (to them) they would be bankrupted.

The only 'bankruptcy' exhibited here is the intellectual bankruptcy of the monetarist idiots running these systems who think that under current monetary system arrangements, that lower interest rates help the economy.

Their thinking is so false and irrational and dark that their deranged monetarist policy now can be seen circling around on itself and they are now putting themselves in danger of (to them) bankruptcy.



If an economic policy was indeed born of a legitimate theory, it would never be seen to operate against the interest of the institution implementing it under any circumstances.


1 comment:

mike norman said...

Love, love, love the picture!