Investors Pay to Lend Germany Money

http://www.spiegel.de/international/europe/0,1518,808080,00.html

nvestors in Europe are so worried about the euro crisis and so desperate to find a safe haven for their cash that they decided to forego an interest rate, and even paid a premium, for the privilege of lending Germany money on Monday.

The auction of six-month German government bills on Monday produced a negative interest rate. Even the Federal Finance Agency, which manages Germany's debt, was astonished. "That has never happened before," said a spokesman.

The average rate amounted to minus 0.01 percent. The auction generated €3.9 billion ($4.9 billion). Demand for the securities was so high that the sale was 1.8 times oversubscribed.

In December, Germany had managed to place paper at a tiny interest rate of 0.001 percent in an auction that was 3.8 times oversubscribed. Germany isn't the first country to receive a premium from investors. Denmark too was recently able to auction bonds for which the government will have to pay back less than it borrowed.

Distrust Plagues Financial Markets

Countries like Germany and Denmark are regarded as reliable debtors. By contrast, high-debt nations like Greece, Spain and Italy have to pay far higher interest rates because investors have less confidence in ther ability to repay their debts.