German 10-year yields hit -0.26%
German 10-year yields hit a remarkable -0.26% today in a fall to an all-time low. It's been a steady decline lower after trading all of last year comfortably above zero.
However worries about trade and Trump's willingness to use tariffs is stoking fear about the global economy and the likelihood that he will hit Germany automakers next.
What's amazing about this is that Germany's government is still reluctant to spend. The market is literally paying them to take on debt and they're not using it to stimulate the struggling region.
I don't see that changing in the short term. So the question is now, how low can yields go?
The record for negative 10-year yields in Japan is -0.29% and that came in 2016. What's unique about Germany is its position within the eurozone. It's an anchor against bad outcomes in Italy, Spain or elsewhere so there's an excess demand.
Still, you would think that might have peaked in 2016 when there were fears of a eurozone breakup and the ECB was ramping up bond buys.
Instead this is truly an unprecedented development and there is no telling how it ends. At the moment, there is still a sense that things are pretty good in the economy. There is some recession talk but we're certainly not in the jaws of it now.
What happens if it all falls apart? You would think there are some theoretical lows. I can't imagine someone paying the German government 1% per year for the privilege of lending them money but these are strange times.
