Money for Nothing
I would never lend money for nothing, unless I was at least getting “chicks for free,” as Mark Knopfler sang almost three decades ago.
Here is the intro. to the Hurriyet Daily News column I wrote at the end of last month, after the German treasury auction when the two-year bond carried a zero coupon for the first time. I argued that low safe haven rates will be with us for a while, even after the Eurozone crisis, or the Eurozone:), comes to an end. You can read the whole thing at the HDN website, and there is a summary at the Roubini Global Economics Economonitor weekly of that week.
The column demonstrated my incomparable skill for timing my columns once again, as both bunds and US Treasuries hit all-time lows on the first day of June, 4 days after the column appeared. They have been on an upward trend since then:
So maybe this is not a good timing for the column, but on the contrary, I feel it is the perfect timing: I argue in the column that the low yields reflect structural/permanent factors as much as cyclical/temporary ones. Therefore, while safe haven bonds may not hit the levels of early in the month for a while, low rates are here with us to stay.
Incidentally, the Financial Times featured exactly the very same supply/demand argument a couple of weeks ago in its Lex column (I apologize if you are not a subscriber, but it would be quite unethical if I just pasted it here; in any case, you are not missing anything if you already read my piece)- nearly two weeks after my column. The FT, and especially their Lex column, is quite good at getting these big themes before everyone else, so I am quite proud of myself.
As I was mentioning in the previous post, no wonder vanity is the devil’s favorite sin 
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One Response to “Money for Nothing”
Tom • June 28th, 2012 at 9:26 pm
Government bonds are sometimes considered more secure than bank deposits and they are more convenient than paper currency.
