Germany to ramp up bond sales
Germany announced it will sell EUR87.5B in debt in Q2 compared to its earlier forecast of EUR55.0B previously.
One of the reasons that Italian and Greek yields came down so much in 2019 was that there was a shortage of German debt and it it was sub-zero yielding. At some point with governments yielding so much debt, it's more than the market can swallow. Obvious during a crisis the demand is overwhelming but the crisis will end someday.
When it does, there is going to be a mountain of debt for someone to swallow. Obviously, central banks are going to eat a huge chunk of it but one day (maybe far into the future) there will be inflation. This cements that there will be a crisis when that happens.
In the shorter term, there is a risk of crowding-out down the quality curve. More government issuance and high-quality corporate bond programs leave junk unprotected. It's not IG companies that are at risk (aside from a few exemptions) and there's nothing for junk and now there are more higher quality bond competing for those dollars.
The laws of unintended consequences can't be broken. We will be paying for the actions in the next few months for a lifetime.
