While we’ve seen the German 2 yr note yield fall below zero in previous intraday trading, Denmark today was actually able to sell newly issued debt at a negative yield. A note maturing on Nov 15th, 2014 was sold with a coupon of -.08%. In sharp contrast, Spain sold 12 and 18 month bills at yields above 5%, about 200 bps above those sold in May. The newly elected New Democracy party in Greece seems close to forming a new gov’t and what will immediately come next will be their attempt to alter the terms of their bailout. Rather than a big change in the conditions, the Germans will likely only give them more time to implement the current promises. Either way, the reality distortion game continues as Greece needs more debt extinguishment and not more time. Investor confidence in the German economy in the next 6 months saw the biggest m/o/m drop since the Russian debt crisis in Oct 1998, falling from +10.8 to -16.9. French business confidence fell 1 pt to the weakest since Mar ’10. UK CPI in May fell to 2.8% y/o/y, below expectations of 3.0% and it’s the 1st time under 3.0% since Dec ’09. The BoE will likely take this as a license to do more QE. The Fed begins their two day meeting and whether something new is announced tomorrow or not, be sure that this collection of doves stand ready to further manipulate the US bond markets.
