euro bonds

[spy74]

Any experienced hands care to comment about what will happen to our fair bund futures market if the EU decides to go down the euro-bond route (appreciate the probability is low at this point)....assume Eurex would introduce a eurobond futures contract and we all pile into that?

 

[TheBramble]

The estimated yield on a Euro-bond based on current situation would need to be in the region of 4%.

What are the current yields on the various EU sovreigns?

 

[TheBramble]

On a slightly tangential note, the move to euro-bond penalises the sensible and rewards the profligate (Germany’s main and quite understandable argument). But if they (the Germans) want any chance of resolution they must realise they are going to have to bear the brunt of the re-distribution of risk. However, packaging the poor performers with the stellar performers is unlikely to incentivise foreign investment sufficiently to induce increased lending. My thought is to perhaps go in the other direction: rather than from small granularity to larger; disintegrate further.

Sub-sovereign does have certain advantages. As do larger corporate bonds. It’s easier to assess an attractive R:R in Bavaria than it is in Germany as a whole. Easier to identify a worthwhile investment for London than the UK in total. Due diligence on Ford is a lot easier than on the entire Motor Sector.

I know it doesn’t fit the EU (Franco-German axis) agenda at all, but diversification of risk would probably yield (no pun) an improved aggregate inward foreign investment flow than going in the proposed direction.

 

[spy74]

thanks, i guess what i want to know is that, should the EU adopt them, does that spell the end of the german bond market and bond futures market? or would the two markets co-exist?

 

[TheBramble]

thanks, i guess what i want to know is that, should the EU adopt them, does that spell the end of the german bond market and bond futures market? or would the two markets co-exist?

The Euro-bond is never likely to exist in any form remotely similar to individual sovereign bonds, if at all.

The financial upheaval required for transfer would pale into insignificance in relation the political and legislative changes involved in removing from nation states the ability to issue their own debt. Seriously a step too far.

One inflation rate. One interest rate. One Bond. Or as we used to say “Ein Volk, ein Reich, ein Führer”.

 

[NVP]

The estimated yield on a Euro-bond based on current situation would need to be in the region of 4%.

What are the current yields on the various EU sovreigns?

Germany is gonna love that rate ....not !

 

[NVP]

Would they "synthesise" an initial rate based on averaging the constituent nations.....well let me rephrase this ....the Markets will probably rebalance the price by doing this anyway .............with Gemany and (umm?) providing the lower stable % rates and the risky nations providing the higher levels of %

N

 

[NVP]

thanks, i guess what i want to know is that, should the EU adopt them, does that spell the end of the german bond market and bond futures market? or would the two markets co-exist?

I alway assumed they would co-exist .........

its just another investment/Funding Mechanism to attract buyers/sellers who may not want to play the more polarised and volatile EUROZONE bond Market game ?

N

 

[Martinghoul]

Bund will sell off.

 

[scose-no-doubt]

Aye.

If ye credit worthiness of a Euromabobble is seen to be similar to Germany's then-dependant on supply/demand factors at issuance for both which is a non-issue for all practical purposes- bund yields would have to approach that of the Euromajig which would depress prices.

Is this option even on the table?

 

[The Leopard]

One inflation rate. One interest rate. One Bond. Or as we used to say “Ein Volk, ein Reich, ein Führer”.

 

[The Leopard]

Euromabobble

 

[spy74]

righto'...so bund futs keep trading and remain liquid?

 

[hgh]

Sub-sovereign does have certain advantages. As do larger corporate bonds. It’s easier to assess an attractive R:R in Bavaria than it is in Germany as a whole. Easier to identify a worthwhile investment for London than the UK in total. Due diligence on Ford is a lot easier than on the entire Motor Sector.

So some corporate bonds have advantage on it. Schaeffler Group offered 200Mio bonds and finally 336Mio were placed.It was raised for 4 times.Nowadays this company help Continental's(tire) powertrain division profitable again.