Wednesday, January 26, 2011

Massive Demand from Asians for Euro Bailout Bond

Chinese and Japanese, that is. According to the UK's Telegraph, the demand was so massive and unprecedented that they would need to apply for the Guinness world record.

From Telegraph (Ambrose Evans-Pritchard):

Asian and Middle-East investors have thronged to buy the first issue of AAA-rated bonds by the eurozone's new bail-out fund, marking a key moment in the evolution of Europe's monetary union.

The auction of €5bn (£4.3bn) of five-year bonds to fund the first stage of the Irish loan package was nine times subscribed, reflecting appetite for bonds ranked with core German or French debt but offering higher returns. The yield was 2.89pc, compared with 2.31pc for Bunds.

The outcome was not in doubt after Japan said it would buy 20pc of this month's total issue by the European Financial Stability Facility (EFSF), and China emerged as a white knight for EMU debt. Asian investors bought 38pc of the issue.

"It is the biggest order book ever. We will check before notifying the Guinness Book of Records but nobody can remember anything like that in the world," said Klaus Regling, head of the EFSF. Ralf Umlauf from Helaba said the auction was "a step in the direction of a eurobond".

Poor citizens of China and Japan. The result of their hard work goes to Europe to bail out PIIGS so that their large corporations continue to sell junks (in case of China) and increasingly junky products (in case of Japan) in Europe. The Japanese government actually took 20%, or 1 billion euro, according to Irish Examiner.

FYI, today's US Treasury bond auction happened to be 5-year notes, and the bid to cover ratio was 2.97. That means it was 2.97 times subscribed. But then, Timmy's Treasury Department manages to raise $35 billion every single month, at least so far.


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