German Auction ‘Disaster’ Stirs Crisis Contagion Concern; Bonds, Euro Fall
By Paul Dobson - Nov 23, 2011 2:11 PM GMT-0300Germany failed to get bids for 35 percent of the 10-year bonds offered for sale today, propelling borrowing costs in Europe higher and the euro lower on concern the region’s debt crisis is driving away investors.
“This auction is nothing short of a disaster for Germany,” Mark Grant, a managing director at Southwest Securities Inc. in Fort Lauderdale, Florida, said by e-mail.“If the strongest nation in Europe has this kind of difficulty raising capital, one shudders concerning the upcoming auctions in other European nations.”
Turmoil that began more than two years ago in Greece and snared Ireland, Portugal, Italy and Spain has closed in on France and now risks engulfing Germany, the region’s biggest economy. Political leaders are struggling to find a fix for the crisis, with German Chancellor Angela Merkelrejecting proposals for common currency-area bonds, while the European Central Bank resists calls to boost sovereign-debt purchases.
Comment: This has little to do with Germany or Europe. The reason for the dearth is a general credit squeeze, it is the beginning of the end of low interest rates that has been predicted here many times over the past couple of months.