Explain to me why bunds are so safe given fundamentals

German national debt 2 trillion (>85% GDP)
2010 German gen gov deficit -4.3%

Workforce is inflexible and aging.

Their currency is up shit creek

Export led country facing a possible global recession

All their neighbours expecting bailouts.

So with all these threats, why does a bund only pay 2%?

Are people mistaking low yield for low risk?

my tip: gold plated tungsten ingots (not to sell but as security for credit) + glock

Up until the intervention, this is exactly what the bond market was beginning to ask. Why the hell are 10years at 2%.

The trade was buy 2 years and sell 10 year German bonds.

The 1 year German bond went negative yield indicating extreme risk aversion.
That day, they intervened.

How many countries can say they have a positive balance of trade with the rest of the world, including China?
Germany can.

Didn’t they try to sell them at even less of a return not so long ago? I think it was 1.35% or something. Then there was a hullabaloo when they failed to sell. There is high demand for these bunds as they are commonly perceived as safe. But at 1.35% even the most desperate buyer must surely go, ‘hang on a minute there, Fritz’.

Ich verstehe es immer noch nicht

ireland can XD

For now. Germany’s surplus was largely gained by lending money to their feckless trading partners consumers to stoke demand for German factory output. Thats come to a shuddering stop. German production costs are going to rise enormously as austerity programmes attempt internal devaluations within the eurozone, Germany is going to lose its competative edge in the medium term…so for me the bund is looking very frothy as a safe haven.

The difference being that in Germany most companies exporting are German owned and managed companies, funded with German money, already being competitive paying more than 25% in corporation tax.

Bunds, like T-Bills and Gilts are purely a safe haven instrument. Its not that the bonds issuing country economy is wonderful, its that they are considered less shit by the markets than the alternatives. Simple as that. And when the current storm ends sooner or later you move to some instrument that has better long term prospects. Which as we are in a depression will be other bonds unless you are a very very agile short trader.

As I said before my logic about bunds was very simple back in 2008. Its now a depression so safety in bonds. Which major player with a very liquid sovereign bond marker has the most disciplined tax payers. UK, UK, D? So if its complete Armageddon which taxpayer will keep paying the coupon? I think D is the winner on that count. And as the funds were already in euros bunds it was. Buy them, forget about them and redeem when the dust has settled.

No big macro analysis of the decision needed. This is not an investment. This is simply securing funds during a very severe financial crisis.

Long term? Germany is fucked. Its going Japaneses no matter how many Agendas 20X0 they roll out.

Regarding your final tip. I can buy a glock 22 over the counter but if you are in Ireland you are out of luck. As I read it, you need the permission of the Minster of Justice to own a glock. Although if you want to defend your horded of bullion bars a bullpup pump action shotgun like the KelTec will have maximum deterrent value. A scary looking mo-fo. Again, something I can buy over the counter at the local gun store but you are out of luck if you are in Ireland. So it looks like you’ll have to defend you stash of ingots with a hurley stick because even pepper spray is illegal in Ireland for personal protection.

You are welcome to your Glock and KelTec.
When I come calling for your gold I’m bringing along my (legally held in the Good Ole USofA) M134 General Electric Minigun …

Hello, little friend.

Several problems. A ) they cost over $200,000 used. b) they have to be mounted on a vehicle or very heavy mount (the recoil will break your arm otherwise) c) the ammo will only last a few secs d) its a squad weapon so better make sure the rest of your squad is with you when you come a calling. Because someone with more practical weapons will red-dot you before you have a chance to set up.

So I think my gold bullion is safe.

A) $200k will be nothing when the dollar collapses.
B) Yer man from Predator proves you wrong ! :stuck_out_tongue:
C) The ammo only lasts a few seconds, but thats a few seconds longer than the target.
d) Only a fool operates alone.

So I’ll take my chances :smiley:

Why so?

Demographics I guess.
My own thinking is very close to JMC’s post above.
Cost of doing business in Germany may have gotten cheaper, but it’s still relativly high.
In Ireland we’ve 6 working people for every pensioner, in Germany it was 3 workers per pensioner back in 2005. They reckon it’ll be 1:1 by 2050, and plenty of people already will be retiring in the next 10 years or so.
And there’s no political desire to encourage immigration to get more young productive taxpayers into the country. And in general Germany is less attractive as a destination for well eductated people. Maybe cause English is not so widely used.
Add to that the feeling, similar to Ireland, that education standards are dropping.
Just my few thoughts and observations.

Anyone know if a pistol crossbow is legal in Ireland? Could use a bow and arrow, but probably a bit unwieldy to tackle someone coming up the stairs at you.

I don’t think your fists are legal in Ireland under that scenario !