A touch of sanity hit European debt markets this week. From Cecil Gutscher and Kevin Buckland, at Bloomberg, via stockmanscontracorner.com:
Investors revolting against negative yields in Europe wiped 142 billion euros ($160 billion) off the value of the region’s government bonds this week, heading for the biggest selloff since at least October 1993.
With Bill Gross and DoubleLine Capital’s Jeffrey Gundlach among investors saying its time to sell bunds, the value of European bonds dropped to 5.75 trillion euros Thursday, the least since March 4, Bank of America Merrill Lynch data show. Germany’s 10-year yields completed their biggest two-day climb since November 2011 as signs of euro-area inflation prompted traders to pare bets the European Central Bank’s quantitative easing will drive up prices on the continent’s benchmark debt.
“Yields had gotten to levels where any investor who had discretion around where they want to put their money would not want to own these bonds as a long-term proposition,” said Peter Jolly, the Sydney-based head of market research at National Australia Bank Ltd., the nation’s largest lender by assets. “It was always unreasonable to my mind that, just because the ECB was buying bonds, that yields had to be jammed to the floor.”
German 10-year yields surged 20 basis points, or 0.2 percentage point, in two days to close at 0.37 percent on Thursday. That’s up from an unprecedented 0.049 percent reached April 17.
The ECB’s 1.1 trillion-euro quantitative-easing program gives cause to avoid the region’s government bonds, said Steven Wieting, global chief investment strategist in New York at Citigroup Inc.’s private bank. Wieting said on April 29 the bank cut allocation to German bunds in favor of U.S. Treasuries in the five- to seven-year range.
http://davidstockmanscontracorner.com/europes-debt-erases-160-billion-on-path-to-record-weekly-loss/
To continue reading: Europe’s Debt Record Weekly Loss
