May 302012

Uh, oh, indeed.

The Financial Times reports in its May 31 edition that yields on two-year German bonds on May 30 fell to zero for the first time. As the Times put it, investors are willing to lend to Berlin for two years for no return.

The yield on the 10-year U.S. Treasury note, the paper reports, fell as low as 1.62%, the lowest since 1946. Other 10-year yields May 30: Germany 1.26%, Denmark 1.09%, the U.K. 1.64%. The latter is the lowest in records that go back to 1703.

The Page 1 Financial Times article quotes Gary Jenkins, head of Swordfish Research, a credit analyst, as follows:

They [interest rates on government bonds] are extreme levels because we are in an extremely perilous situation. People just want to put their money somewhere where they think they will get it back. People may soon be paying Germany or the US to look after their money.

I have not seen this movie before. But it looks like a sequel to that 2008 blockbuster — The Crash of Lehman Brothers Holdings — that nearly sank the global economy. I don’t know how this one ends. I don’t think anyone does.

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