An ‘unbelievable' safe haven trade - Germany borrows at 0%

Berlin is to sell up to €5bn of two-year Schatz notes (treasury notes) at auction today with a 0% coupon, as investors' flight to safety gathers pace and heightens 'market dislocation'.

Benchmark two-year German debt currently yields 0.06%, up from record lows of 0.03% earlier last week, indicating capital preservation remains a paramount objective for many. Berlin's most recent auction of two-year debt, issued in April, priced with a coupon of 0.25%. Marc Oswald of Monument Securities said Germany's finance minstry and central bank, the Bundesbank, had little choice in the pricing of the debt given current market conditions. "With secondary market yields at 0.06% on the current 2-year, the DFA/BBK had no choice given local market issuance rules but to set a zero ...