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The country's debt agency said the shortfall in the sale reflected worsening market nerves on European debt markets but added it would sell back the retained amount to investors on secondary debt markets and that Germany would not face a funding bottleneck.

The results compared with an average retention by the central bank of 17.83 percent at 10-year bond auctions in 2011. Data from IFR, a Thomson Reuters service, showed this to be the highest Bundesbank retention since at least July 1999.

The article conflates the German debt Agency and the Bundesbank?

Also, the Bundesbank (not the debt agency) routinely "retains" a fraction of all bond issues? Is that a semantic legerdemain to avoid saying it's "buying" them?

To err is of course human. But to mess things up spectacularly, we need an elite — Yanis Varoufakis

by Carrie (migeru at eurotrib dot com) on Wed Nov 23rd, 2011 at 06:55:37 AM EST
Meaning it is still possible that it is just a matter of clueless journalism.
Have those bonds been sold or not?
by generic on Wed Nov 23rd, 2011 at 07:21:56 AM EST
[ Parent ]
But, when they're "not sold", are they "retained" by the BuBa or by the German debt agency? And if they're "retained" by the BuBa, does the government get the cash for the bond issue? And if they do, and it's a secondary market sale, who's the intermediary?

To err is of course human. But to mess things up spectacularly, we need an elite — Yanis Varoufakis
by Carrie (migeru at eurotrib dot com) on Wed Nov 23rd, 2011 at 07:27:05 AM EST
[ Parent ]
Deutsche Anleiheemission -
"Das ist ein absolutes Desaster"


"Life shrinks or expands in proportion to one's courage." - Ana´s Nin
by Crazy Horse on Wed Nov 23rd, 2011 at 07:32:54 AM EST
[ Parent ]
by IM on Wed Nov 23rd, 2011 at 07:35:44 AM EST
[ Parent ]
So this is much ado about the clueless English-speaking press?

To err is of course human. But to mess things up spectacularly, we need an elite — Yanis Varoufakis
by Carrie (migeru at eurotrib dot com) on Wed Nov 23rd, 2011 at 07:42:36 AM EST
[ Parent ]
In which case I made a clueless English comment on the FAZ. Oh well.
by afew (afew(a in a circle)eurotrib_dot_com) on Wed Nov 23rd, 2011 at 07:57:34 AM EST
[ Parent ]
The german press doesn't mention the bundesbank. On the other hand the fish don't see the water.
by IM on Wed Nov 23rd, 2011 at 08:07:11 AM EST
[ Parent ]
Seems to be nothing but a language issue. And here is what the Buba says: they sold two thirds and are hoping to sell the rest in the next days.
by Katrin on Wed Nov 23rd, 2011 at 08:29:10 AM EST
[ Parent ]
At what rate? I presume they're going to have to sweeten the deal to get buyers?

(Not too sure how these markets work ...)

by Colman (colman at eurotrib.com) on Wed Nov 23rd, 2011 at 08:30:04 AM EST
[ Parent ]
1.98%. Apparently the problem is that the bunds aren't profitable enough compared to the Club Med. St. Market is reversing its views on the risk, I assume.
by Katrin on Wed Nov 23rd, 2011 at 08:36:41 AM EST
[ Parent ]
I mean at what rate will they place them in the secondary market.
by Colman (colman at eurotrib.com) on Wed Nov 23rd, 2011 at 08:37:46 AM EST
[ Parent ]
As much as they can get, I guess. And that depends on the buyers, er, if any...
by Katrin on Wed Nov 23rd, 2011 at 08:45:45 AM EST
[ Parent ]
And has the German government now received the money anyway?
by Colman (colman at eurotrib.com) on Wed Nov 23rd, 2011 at 08:30:33 AM EST
[ Parent ]
No, that's the point. Reuters got it wrong.
by Katrin on Wed Nov 23rd, 2011 at 08:37:22 AM EST
[ Parent ]
So the German government debt increased by 3.6bn today and not by 6bn?

To err is of course human. But to mess things up spectacularly, we need an elite — Yanis Varoufakis
by Carrie (migeru at eurotrib dot com) on Wed Nov 23rd, 2011 at 09:36:48 AM EST
[ Parent ]
exactly
by Katrin on Wed Nov 23rd, 2011 at 09:51:20 AM EST
[ Parent ]
But if the BuBa decides to sell .4bn tomorrow to depress interest rates, as part of monetary policy, then the federal debt increases by 0.4bn?

This makes no sense, especially when the BuBa lectures the federal government on the need to keep the amount of debt outstanding under control.

To err is of course human. But to mess things up spectacularly, we need an elite — Yanis Varoufakis

by Carrie (migeru at eurotrib dot com) on Wed Nov 23rd, 2011 at 10:10:00 AM EST
[ Parent ]
The Buba document calls the un-auctioned 2.356bn "Marktpflegequote", which I'd tentatively translate as "Market maintenance quota".

It doesn't say what that means.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Nov 23rd, 2011 at 08:52:12 AM EST
[ Parent ]
It used to mean they are holding back part of the emission deliberately in order to react to the market, influencing the price. See.  Today's "Marktpflegequote" clearly is involuntary, though.
by Katrin on Wed Nov 23rd, 2011 at 09:08:06 AM EST
[ Parent ]
The FT Alphaville thing I posted below wonders if it was voluntary after all ...

I think.

by Colman (colman at eurotrib.com) on Wed Nov 23rd, 2011 at 09:09:50 AM EST
[ Parent ]
According to the agency, the usual retained instruments are about 20%.

So 39% is not voluntary.

by IM on Wed Nov 23rd, 2011 at 11:44:56 AM EST
[ Parent ]
They also say "it varies wildly" so maybe it is always involuntary and they don't give it much thought, unlike the ticker watchers at Reuters or FT Alphaville who promote noise to news.

To err is of course human. But to mess things up spectacularly, we need an elite — Yanis Varoufakis
by Carrie (migeru at eurotrib dot com) on Wed Nov 23rd, 2011 at 12:07:16 PM EST
[ Parent ]
Though there didn't seem to be a lack of inside commentators to say it was a catastrophic auction...
by afew (afew(a in a circle)eurotrib_dot_com) on Wed Nov 23rd, 2011 at 02:20:27 PM EST
[ Parent ]
Eurointelligence this morning has this appreciation:

Yesterday, a bund auction flopped for the first time in living memory - as a result of which the entire eurozone no longer has a viable bond market. The flop was a major global event. It sent share price tumbling. Financial investors are now heavily betting on the break-up of the eurozone. Having held up well during most of the crisis, the euro declined to $1.33. Despite the 200bp jump in German yields, Italy's 10-year spreads rose back above 500bp, and Belgium's are now at 350bp.With every day of complacent and ignorant political announcement, especially from Berlin, the crisis deteriorates, and the cost of crisis resolution increases.
by afew (afew(a in a circle)eurotrib_dot_com) on Thu Nov 24th, 2011 at 03:07:01 AM EST
[ Parent ]
Uh, the BuBa is part of the "we" that sells the bonds?

That's what I was asking before. Is Reuters conflating the Bundesbank with the Deutsche Finanzagentur? It makes sense that the Finanzagentur sells the bonds, not that the Bundesbank does.

To err is of course human. But to mess things up spectacularly, we need an elite — Yanis Varoufakis

by Carrie (migeru at eurotrib dot com) on Wed Nov 23rd, 2011 at 09:25:33 AM EST
[ Parent ]
German bond sale fails to attract buyers - FT.com

...the bid-to-cover ratio was only 0.65 times as the German debt agency sold just €3.644bn of its new 10-year Bund of the €6bn targeted.

The Bundesbank retained a massive €2.356bn, which it will plan to sell over the coming days in the hope market sentiment improves. If the Bundesbank retention is included, the bid-to-cover ratio was a modest 1.1 times.

Many market participants consider this an auction failure although some say technically it is not, as by retaining its own bonds the Bundesbank has pushed the bid-to-cover ratio above 1.0 times.

The average yield for the 10-year bonds was 1.98 per cent.

So the debt agency sells but they are the Buba's "own bonds"?

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Nov 23rd, 2011 at 08:07:47 AM EST
[ Parent ]
Contagion Shakes The Euro Core As 10 Year German Bund Auction A "Complete And Utter Disaster" | ZeroHedge
Earlier today Germany tried to sell €6 billion of 10 Year bunds. It "sold" €3.644 at a 1.98% yield. Which meant the German debt agency had to retain, i.e., not sell,  the 39% balance, or €2.356 billion.
by afew (afew(a in a circle)eurotrib_dot_com) on Wed Nov 23rd, 2011 at 08:09:36 AM EST
[ Parent ]
The German Debt Agency (bond issuer) is Finanzagentur GmbH.
by afew (afew(a in a circle)eurotrib_dot_com) on Wed Nov 23rd, 2011 at 08:14:18 AM EST
[ Parent ]
We're deep into accounting sleight-of-hand at this stage, aren't we?
by Colman (colman at eurotrib.com) on Wed Nov 23rd, 2011 at 08:15:12 AM EST
[ Parent ]


Friends come and go. Enemies accumulate.
by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Nov 23rd, 2011 at 08:23:17 AM EST
[ Parent ]
Have you got any more explanation?
by afew (afew(a in a circle)eurotrib_dot_com) on Wed Nov 23rd, 2011 at 08:39:54 AM EST
[ Parent ]
... the German government has set up a special purpose vehicle to buy its own bonds. This allows it to sell the bonds gradually over time rather than in one big auction. Which makes sense. These big, lumpy bond auctions always were insane.

The accounting legerdemain enters into it if this SPV has access to the ECB's rediscount or market maker facilities. If it does, the German government issues bonds to... the German government, which then goes to the ECB to trade them for cash.

If it doesn't, then it's just stupid journalists being stupid.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Nov 23rd, 2011 at 08:44:47 AM EST
[ Parent ]
like this you mean?

It would be fun if all eurozone countries did it ...

by Katrin on Wed Nov 23rd, 2011 at 08:54:48 AM EST
[ Parent ]
Fixed link

To err is of course human. But to mess things up spectacularly, we need an elite — Yanis Varoufakis
by Carrie (migeru at eurotrib dot com) on Wed Nov 23rd, 2011 at 12:05:40 PM EST
[ Parent ]
I wouldn't call a debt agency a special purpose vehicle. The use of a agency to handle the debt is quite common. And the treaty is quite clear that subordinated agencies of a state can't get credeit from the ECB either.

I think the Budnesbank is here just acting as a broker on the secondary markets.

by IM on Wed Nov 23rd, 2011 at 09:31:49 AM EST
[ Parent ]
So who's holding the 2.4bn that weren't auctioned today? The Finanzagentur or the BuBa?

To err is of course human. But to mess things up spectacularly, we need an elite — Yanis Varoufakis
by Carrie (migeru at eurotrib dot com) on Wed Nov 23rd, 2011 at 09:37:36 AM EST
[ Parent ]
Owner is the Finanzagentur. The Buba is only broker.
by Katrin on Wed Nov 23rd, 2011 at 09:55:56 AM EST
[ Parent ]
The FT article supplied us with that link:

http://www.deutsche-finanzagentur.de/fileadmin/Material_Deutsche_Finanzagentur/PDF/Schuldenstand/Sch uldenstand_Quartal/2009-30-09.pdf

It doesn't matter it is from 2009, because is shows under IV. Bestand an Papieren im Besitz
des Bundes

that the Federal Republic owns around 48 billion of federal debt instruments. That won't be different now and easily explains the retained three billion of this action.

so owner federal republic, broker bundesbank

by IM on Wed Nov 23rd, 2011 at 10:07:02 AM EST
[ Parent ]
But the bonds are retained by the BuBa for monetary purposes and are sold into the market at the discretion of the BuBa, not the Finanzagentur.

That's not a broker to me. Who decides whether the bonds are sold? The Owner or the Broker?

To err is of course human. But to mess things up spectacularly, we need an elite — Yanis Varoufakis

by Carrie (migeru at eurotrib dot com) on Wed Nov 23rd, 2011 at 10:07:07 AM EST
[ Parent ]
I now tried to inform myself using the Finanzagentur GmBH website. At least according to them, the procedure regarding the primary market is this:

http://www.deutsche-finanzagentur.de/en/institutional/primary-market/auction-procedure/

"The German Federal Government usually places single issues by auction. Only members of the "Auction Group Bund Issues" can participate directly in these auctions (see the section entitled Auction Group Bund Issues).
The auctions are carried out via the Deutsche Bundesbank Bund Bidding System (BBS). "

So the use the Bundesbank or rather its bidding system.

Regarding the secondary market, they say:

http://www.deutsche-finanzagentur.de/en/institutional/secondary-market/secondary-market-activities-f inance-agency/

"The level of how much own securities can be held is regulated in § 2 (5) of the Budget Law for credit authorizations. This dictates that currently, credit can be raised for financing purchases "within the framework of market support operations in the secondary market". The volume of credit should not exceed 5% of the nominal volume of the Federal bonds, five-year Federal notes, Federal Treasury notes and Treasury discount paper in circulation annually.

At each auction the German Federal Government can retain a portion of securities for secondary market operations which is then sold successively in the market afterwards. The volume of securities retained for market operations varies widely from auction to auction. Since 2005, the amount retained has averaged about 20% of the issuance volume (which also included money market paper and inflation-linked German Government securities)."

and:

"For its secondary market operations the Federal Government uses electronic trading platforms and the German stock exchanges. The agency's stock of bonds can be sold or purchased in the spot market within the framework of the German Federal Government's liquidity planning. The focus is on interbank trading and on supporting the activities of the market makers. This service provided by the issuer also enables members of the Auction Group to conduct transactions directly with the issuer as counterparty if necessary. The spot transactions are supplemented by repurchase agreements ("repos") and securities lending. The German Finance Agency executes its transactions with a minimum impact on the market and in line with market prices."

So contrary to my assumption, the Bundesbank, apart from the bidding system is not involved at all. That also means the speculation of Alphaville is without merit.

by IM on Wed Nov 23rd, 2011 at 11:41:06 AM EST
[ Parent ]
Thinks, that's all clear now and Reuters was also wrong to say "Bundesbank".

What's peculiar here is that the Finanzagentur retains a stock of bonds which then uses for secondary market purchases, but (if we are to believe them) not as a market maker and as a price-taker. The Finanzagentur could well engage in limited yield manipulations in the secondary market, which would basically mean the federal government would be meddling in monetary policy. Of course they would never dream of doing such a thing. What they do say is that there is a "Federal Government [own Bond liquidity] Management", which could be construed also as meddling in monetary policy.

To err is of course human. But to mess things up spectacularly, we need an elite — Yanis Varoufakis

by Carrie (migeru at eurotrib dot com) on Wed Nov 23rd, 2011 at 11:57:44 AM EST
[ Parent ]
the Finanzagentur retains a stock of bonds which then uses for secondary market purchasesoperations

Purchases or sales. Obviously, the initially retained stock is intended for sales.

To err is of course human. But to mess things up spectacularly, we need an elite — Yanis Varoufakis

by Carrie (migeru at eurotrib dot com) on Wed Nov 23rd, 2011 at 12:59:21 PM EST
[ Parent ]
I think you are reaching to find a connection to monetary policy.

"What's peculiar here is that the Finanzagentur retains a stock of bonds which then uses for secondary market purchases"

Is that peculiar? Or do all treasuries and debt agencies do this?

by IM on Wed Nov 23rd, 2011 at 02:19:33 PM EST
[ Parent ]
The Finanzagentur could well engage in limited yield manipulations in the secondary market, which would basically mean the federal government would be meddling in monetary policy.

That's probably what the "no more than 5 % of market volume" clause is there to prevent.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Nov 23rd, 2011 at 03:04:28 PM EST
[ Parent ]
I wouldn't call a debt agency a special purpose vehicle. The use of a agency to handle the debt is quite common.

I called it an SPV because there's no good reason not to simply have the Treasury do it outright. Not because it's toxic (it's not).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Nov 23rd, 2011 at 03:06:22 PM EST
[ Parent ]
A simple subsidiary. Nothing more. Everything the agency is on the balance sheet, after all.
by IM on Wed Nov 23rd, 2011 at 03:12:36 PM EST
[ Parent ]
See FT Alphaville post linked by Colman.
by afew (afew(a in a circle)eurotrib_dot_com) on Wed Nov 23rd, 2011 at 09:35:48 AM EST
[ Parent ]
I don't really understand the article.The Bundeabnk is intervening in the repo marjet by not intervening?

That point, though, semms to be easy to prove aor disprove:

>That, alongside the fact that the Bundesbank is retaining an ever greater share of bonds from auction, suggests only one thing to the logical mind.>

My empirical mind would just look up if the "ever greater share of bonds from action" is actually true prior to this action.

by IM on Wed Nov 23rd, 2011 at 09:57:55 AM EST
[ Parent ]
Here are all the auction results this year:

http://www.deutsche-finanzagentur.de/fileadmin/Material_Deutsche_Finanzagentur/PDF/Aktuelle_Informat ionen/Auktionsergebnisse_E.pdf

The last auction of 10 year bunds was October 19th and 925 million out of 5,000 million € was retained. The first auction in 2011 was January fifth and 1084 million out of 5 billion was retained. So apart from this last auction there was no movement in the retained share.

And here is an explanation of  seconderay markets finance activity.

http://www.deutsche-finanzagentur.de/en/institutional/secondary-market/secondary-market-activities-f inance-agency/  

"The volume of securities retained for market operations varies widely from auction to auction. Since 2005, the amount retained has averaged about 20% of the issuance volume (which also included money market paper and inflation-linked German Government securities)."

by IM on Wed Nov 23rd, 2011 at 11:33:41 AM EST
[ Parent ]

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