Germany Auctions Bills With Negative Yield Amid Debt Crisis

Germany sold six-month treasury bills at a negative yield for the first time amid demand for the debt securities of Europe’s biggest economy as a haven from the sovereign debt crisis roiling the region.

The government auctioned 3.9 billion euros ($4.98 billion) of securities maturing in July at an average yield of minus 0.0122 percent, the Federal Finance Agency said in an e-mailed statement today. It was the first time it sold the securities at a negative yield, Joerg Mueller, a spokesman in Frankfurt, said in a telephone interview. The Netherlands sold 107-day bills at minus 0.007 percent on Dec. 12.

Some investors are prepared to pay when lending to the most creditworthy governments in exchange for the assurance of getting their capital returned as a solution to the euro-region debt crisis, which forced Greece, Ireland and Portugal to seek bailouts, eludes policy makers. Yields on three-month U.S. Treasury bills fell below zero for the first time in December 2008 after the collapse of Lehman Brothers Holdings Inc.

“It just underpins how nervous the overall market is,” said David Schnautz, a fixed-income strategist at Commerzbank AG in London. “There are investors out there who really worry about the return of their money. That’s why they are OK donating some of their money to Germany, just to make sure they get it back.”

Bill Demand

The yield on the two-year German note fell two basis points to 0.143 percent at 3:20 p.m. London time, and declined earlier to 0.140 percent, the least since Bloomberg started tracking the data in 1990.

The sale drew bids that were about double the amount allotted, the debt agency said. Some 25 of the Federal Finance Agency’s 39-member auction group participated in the bidding, it said. Investors bid for 1.8 times the securities offered.

German Chancellor Angela Merkel and French President Nicolas Sarkozy outlined the increased pace of their response after a meeting in Berlin today, signaling that euro-area leaders may complete their new budget rulebook by Jan. 30, one month ahead of schedule.

“There is a good chance that we can sign the debt brakes and everything that’s connected to it already in January, but at the latest in March, and that we’re making really good progress in negotiations,” Merkel said at a joint press conference with Sarkozy after they met.

A surge in demand for Danish bonds and bills from investors seeking to escape Europe’s debt crisis allowed the Nordic nation to get paid to borrow last month. Denmark sold 1.8 billion kroner ($308 million) of 59-day bills and 220 million kroner of 151-day bills on Dec. 29 at negative yields of 0.21 percent and 0.07 percent, respectively.

The lowest rate at a U.S. bill auction was 0.00 percent for four-week Treasury bills, which first happened July 6, 2011. The lowest yield at a three-month bill auction was 0.005 percent on Nov. 7 and Dec. 19. The lowest yield at a six-month bill offering was 0.030 percent on Sept. 19.