Yields on short-dated German bunds turn negative

Yields on short-dated German government bonds turned negative this week as bondholders paid to lend to the country, despite a dismal auction of 10-year bonds on Wednesday.

Short-dated debt, known as Bubills, maturing in May 2012, offered a negative yield of -0.05% earlier today, before moving back into positive territory. This was the first time 6-month bunds have offered a negative yield since the creation of the euro. Earlier this week, a €6bn auction of long-dated German bunds fell flat, prompting concern among investors. The bid-to-cover level for the auction on 10-year bunds was only 1.07, well below previous auctions, while the German government was able to sell only €3.644bn ($4.92bn) of the €6bn offered. Observers said the result was the w...