Failed German 10 Year Government Bond Auction is a ‘Canary in a Coal Mine’

Failed German 10 Year Government Bond Auction is a ‘Canary in a Coal Mine’

Stan Szymanski

This is a short, but important article.

Short because there is not a ton of info out ‘there’ about the actual particulars of yesterday’s German Government bond auction.

Important, because when a 1st world sovereign power can’t sell enough debt to cover its stated needs, a canary just died in the coal mine-so to speak.

The publications of investing.com, gotrade.com and Bloomberg have articles up about the German Gov’t bond offering of one day ago. And yes, the war does have something to do with inflation and rates going up a bit. The above articles reported the rate of the new bond, but not much else. Big deal.

While on LinkedIn today, I ran across this repost of a post on ‘X’ by Holger Zschaepitz:

…’Good morning from Germany where today’s 10y govt bond auction technically failed (emphasis added). Of the €5bn on offer, investors submitted bids for only €4.5bn. In the end, just €3.8bn was placed, at a yield of 2.89%; noticeably higher than the 2.73% achieved at the previous auction in February.’…(Holger Zschaepitz @ Schuldensuehner on ‘X’)

If what Mr. Zschaepitz claims is true then the German Government 10 year bond auction really did fail. When a sovereign government offers €5 billion for sale and investor bids for the bond only add up to €4.5 billion that means that there is not even enough investor interest to fund the stated needs of the German government of €5 billion.

What happens when a sovereign government can’t even raise enough investor interest just to meet the total offer in the auction? Maybe they can’t retire maturing bonds. Maybe they can’t service all the interest they owe on their national debt. Maybe some government offices or programs shut down.

Maybe it signals the catastrophic nature of a worldwide system of fiat debt that has come to the end of the road and perhaps, Germany is first in a long line of dominoes to fall. Perhaps a nation like Japan, whose national debt is sky high is next.

Maybe investors (and other sovereign nations) are starting to ask the question: Why buy bonds of debt ridden countries when, at least for now-gold is available?

A failed sovereign government bond auction is a canary in a coal mine. It’s warning signal is echoing in the world’s gold mines.