, Columnist
Happiness Is a New Schatz
Wednesday's bund auction could tell a different story.
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Happiness is issuing a new two-year bond with a princely zero percent coupon and seeing investors queue up to pay nearly 102 percent for it (despite them knowingly receiving only 100 percent back). The specter of Frexit and redenomination risk loom large in Europe, and the ardor for German credit, the finest available in the euro-area, looks undimmed. But Wednesday's 10-year bund auction is another matter.
The yield at Tuesday's Schatz sale was minus 0.92 percent, very close to the all-time low and substantially down from minus 0.75 percent at the last sale. Simply put if the worst were to happen and the euro became no more, investors would rather be left holding German risk -- and they are prepared to pay for it.