Morning Report: German Bund sets a record for consecutive days with a negative yield

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S&P futures 3023 1.5
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10 year government bond yield 2.07%
30 year fixed rate mortgage 4.04%


Stocks are flat as we await earnings from market heavyweights like Amazon and Alphabet. Facebook’s numbers beat the street, while Tesla disappointed. Bonds and MBS are down small.


New home sales came in weaker than expected, but at least exhibited positive growth. In June, we saw new home sales of 646,000, which was up 7% MOM and 5% YOY. New home inventory 338k units, which represents a 6.3 month supply.


Durable Goods orders rose 2% in June, according to Census. Ex-transportation, they rose 1.2%, and ex-transportation and defense they rose 3.1%. Non-defense capital goods orders (ex-aircraft) rose 1.9%, which shows that businesses are expanding capacity.


In other economic news, initial jobless claims fell 13k to 206,000.


The ECB opened the door to future stimulus this morning, saying they saw rates lower over the next 12 months. The German Bund is slightly stronger, however we are still close to record low yields at negative 37 basis points. The Bund set a record for the longest streak of days in negative territory – now 79. This eclipses the record set in 2016. What exactly does “negative yield” mean? It means the German 0s of ’29 is trading at 103.66. It is a zero coupon bond, meaning it pays no periodic interest. You pay 103.66 and on August 15, 2029, you will get back 100.


german bund yield


To get an idea of how much things have changed in Europe, remember the PIIGS? The PIIGS were an acronym for Portugal, Italy, Ireland, Greece, and Spain – all high-yielding sovereign debt that had fiscal issues. Where are they now? All yielding less than the US 10 year, with Greece at 1.95%, Portugal at 38 basis points, Ireland at 11 basis points, Italy at 1.48% and Spain at 33 basis points. Don’t forget, a huge swath of the European corporate sector trades with negative yields.


Most (if not all) of these countries have debt-to-GDP ratios well over 1, so we are seeing a real-time test of the hypothesis that government debt levels don’t matter. The granddaddy of debt to GDP ratios is Japan, sitting at 2.4x and its 10 year bond yields negative 15 basis points. Who knows how all this ends up, but we have a global sovereign debt bubble of epic proportions.


Bill Gross used to call the US the “cleanest dirty shirt” in the world. Indeed. For all the handwringing over debt to GDP ratios, the US debt to GDP ratio sits at just over 1, and a good chunk of that is owned by the Fed. Essentially, the low yields overseas cannot help but act as an anchor for US yields, which means unless the bubble overseas pops, I can’t see an impetus to push rates dramatically higher. And the first rule of bubbles is that they go on longer and go further than anyone expects.

14 Responses

    • How brave!

      Oh, yeah, this is guaranteed to fail. Even progressive comic fans are going to be irritated by this take. Like, extremely.

      “What, in 2019, is the equivalent of the nuclear standoff between the Russians and the United States? It just felt like it was undeniably race and policing in America.”


      “In a traditional superhero movie the bad guys are fighting aliens. And when they beat the aliens, the aliens go back to their planet and everybody wins,” Lindelof said. “There’s no defeating white supremacy. It’s not going anywhere. But it felt like it was pretty formidable foe.”

      Okay. Lindelof is just off his nut. Good luck to him. It’s on HBO, so, you know. But I see this tanking.


    • Falwell’s profile announces that “Haters will be blocked,”


      According to the Faculty Handbook, for instance, professors are expected to “promote . . . free market processes” and “affirm . . . that the Bible is inerrant in the originals and authoritative in all matters.”

      A Christian college advocates the Bible? Shocking!

      The article sounds like the college is oppressive and Falwell is a dick, all of which is believable. And not unexpected. Who in the world would voluntarily go to Liberty college, or expect it to want to conform to progressive expectations of college activism and the embrace of leftism generally?

      There’s an effort to guilt-by-association Trump, but mostly it sounds like the author had a shitty time in college and is trying to parley that into future career opportunities—and get himself in the WaPo by tying it all to Trump. Although it’s not Trump’s fault that Fallwell is an authoritarian micro-manager.


  1. Koskids not happy with their compatriots reporting.


    • Wow. Way back in 2015, Rashida Tlaib tweeted out that Donald Trump should be “deported”.

      Question for all of those who were accusing Trump of racism last week: Was Tlaib’s demand a “racist” tweet? If not, why not?


      • Did you notice the Guardian tweet: “Trump: Ban All Muslims from entering the US.”

        Of course he never said that or anything close to that. Fake news indeed…


      • Omar wanted to deport some Somali in Minnesota she didn’t like as well.


        • More racism?


        • Orange man bad.

          That makes me wonder….doesn’t that make Trump a “non-white person of color”? Does Trump get to tick the “other” box for the race question on the census?


        • A: chosen people (members of the superior tribe) do not exhibit the qualities of the inferior or evil tribes, even when it looks to the ignorant or inferior intellects like they are doing the exact same things, progressives can’t be racists because that’s a negative quality that can only be exhibited by their inferiors.
          B: Numerous progressives have made pretzel-twist arguments about why only white people can be racist. Racism must be institutional, racism can only be the case if the collective tribe (assigned to people by progressives—not necessarily a tribal membership the inferior folks acknowledge) has power.
          C: They don’t have to explain only white people are racist—it’s like self-evident. There should be a law about disagreeing with this, it’s like holocaust denial.
          D: White supremacists are anyone who disagrees with progressives on race, so … you know, logic is not really part of the argument.


      • Progressives can’t be racists. This is just Jr trying to distract from his father’s obvious white supremacism. It is known.


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