[Ethel_Fred]

France joined a handful of euro-zone countries Monday in selling short-term debt at negative interest rates as investors seek alternatives to expensive German and Dutch debt.

Earlier in the day, Germany's six-month borrowing costs again turned negative at an auction, after the European Central Bank slashed its key policy and deposit rates to unprecedented levels last week.

The negative yield at Monday's German auction, the lowest on record in this maturity segment, means that investors effectively pay the German state for the privilege of holding its debt.

The Dutch State Treasury Agency had already sold Treasury Certificates, or short-term debt, at negative yields. Now the French government is doing so as well.

Remind me again - Aren't these are countries that are in crisis?

[johnnybgoode83]

I don't know what any of that means

[Ethel_Fred]

Originally Posted by johnnybgoode83

I don't know what any of that means

It means an investor gives the Germans $1000 and in a few months time the Germans give back $900 - so the investor has lost $100. Yet they are happy to do so rather than sticking in under the mattress

[cpu121]

Mainly French investors dumping Greek, Italian and Spanish bonds and bringing the money home. Only possible because of the ECB's LTRO flooding the markets with €1 trillion. So more a measure of how screwed everyone else is.

French debt still has a large spread over German debt, which more accurately reflects the problems facing the French economy.

[Aneechik]

Originally Posted by Ethel_Fred

It means an investor gives the Germans $1000 and in a few months time the Germans give back $900 - so the investor has lost $100. Yet they are happy to do so rather than sticking in under the mattress

Why would an investor do such a stupid thing?

[KIIS102]

Hasn't this happened with UK debt a couple of times recently too?

[Rafer]

They can't do that. There's nobody in the world who is going to buy. Unless it's central banks buying from each other in an effort to spread the debt around to limit a single nations exposure.

[PrestonAl]

Originally Posted by Aneechik

Why would an investor do such a stupid thing?

because people need to store money somewhere.

This is a new one for France, but Germany has been selling a a profit for a while now (strangely, the UK has also been selling at a profit).

[cpu121]

Originally Posted by Aneechik

Why would an investor do such a stupid thing?

Partly because regulators and central banks are forcing banks and other instititutions to hold "low risk" assets - specifically their government bonds. Governments love this because it provides a captive market even though it increases the risk of financial sector collapse.