World News – AU – Subzero Rates Club swells with Spanish debt and Australian bills

Some investors who bought Australian bills and Spanish benchmark bonds at auction are effectively paying the nations to hold their securities.

A three-month Australian banknote auction on Thursday had an average return of 0. 01%, with buyers bidding most aggressively on the sale receiving a return of minus 0. 01%. The average interest rate on Spain’s 10-year debt went below zero for the first time.

Debt with a return below zero is increasing worldwide. Nearly $ 18 trillion in investment grade bonds now have an interest rate below 0%. Portuguese 10-year bonds rebounded to push their yields into negative territory this week, while their Spanish counterparts’ yields are trading within 1 basis point of the threshold.

With much of Europe on lockdown, fears about the economic impact continue to increase, increasing the prospect of further monetary stimulus from the European Central Bank on Thursday. Economists polled by Bloomberg expect the ECB to add 500 billion euros (604 billion US dollars) to the pandemic purchase program. Commerzbank AG is forecasting a premium of 600 billion euros.

Meanwhile, yields in Australia have been close to zero since the central bank cut interest rates to zero. 1% to counter the financial and economic impact of the coronavirus pandemic.

Thursday’s development is a symptom of the high levels of liquidity available to banks since the Reserve Bank of Australia launched a three-year loan program for lenders. The borrowing known as the Term Funding Facility has so far amounted to almost $ 84 billion. AUD (63 billion. USD), which has reduced the need for short-term funding from other companies.

However, it is not a sign that investors see the central bank heading for additional rate cuts. Pricing in the swap markets suggests that the base rate will remain on hold until the end of next year and beyond.

Australia, Yield, US Treasury Department Security, Interest Rate, Australian Financial Management Bureau, Debt