The Flood of Dollar Denominated Sovereign Bonds.

Central banks have often issused bonds denominated in Dollars in the past, but never in the magnitude that they are being issued in today.

Germany, Italy and Austria issued $9.25 billion worth of bonds in September.

Even Venezuala are in on the act.

Canada and Brazil have also issued bonds in Dollars. It’s as if everyone thinks that betting against the Dollar is a one-way path to riches.

I wonder did they share out the €150 billion in US bonds between them…

Maybe Lenny should try this out after his 6 months are up.

stupid question i’m sure but…
why would issuing bonds in a foreign currency be considered a good idea? and why would investors buy?

If the dollar drops in value then it will take less, for example, euro to repay the bond.

if interest rates are lower in that country,
then the coupon payments every year would be lower (assuming the dollar vale remains constant).

One of the features of the credit crunch was a lack of dollar denominated assets as lots of dollar loans were called in. This led to a crunch on the dollar with the result that huge swap lines were agreed between the Fed and the ECB (and the BoE). Part of the reason for issuance of dollar assets (in addition to the above), from the buy perspective may be to have a deep liquid market for dollar assets in Europe.