Reviews Joint bonds: New types of euro bonds strengthen the euro

09:20  08 october  2020
09:20  08 october  2020 Source:   handelsblatt.com

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This article explains the Euro bonds or Eurobonds with their topics Meaning, Definition, Characteristics, Types , and Advantages. There are three types of Eurobonds , of which two are international bonds . A domestic bond is a bond issue in a country by a resident of that country.

Current data on European government bond yields, including the yield, daily high, low and change% for each bond . The yield on a Treasury bill represents the return an investor will receive by holding the bond to maturity, and should be monitored closely as an indicator of the government debt situation.

The joint financing of the corona aid creates a security with a high credit rating. That makes the European capital market more attractive.

Der Euro-Kapitalmarkt muss noch wachsen. © Reuters The euro capital market still has to grow.

In the USA , government bonds form a market of around $ 20 trillion. Even after the new euro bonds with a volume of 900 billion euros have been issued, Europe will still be a long way from this. But these papers are an important step on the way to making the euro a currency with international weight .

So far, the euro has been overshadowed by the dollar for one reason in particular: There are not enough “safe assets” in this currency, ie papers whose creditworthiness is beyond doubt. That is why the euro is not so well suited as a reserve currency for large investors and central banks. So far, German government bonds have largely played this role as safe paper, because Germany is considered to be the financially strongest, at least among the large euro countries.

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Joint bonds can include any combination of parties. They are common when a parent company is required to guarantee the obligations of a subsidiary business. Many economists argue that the European Union should consider issuing joint bonds to strengthen the European currency.

This page provides government bond yields for several countries including the latest yield price, historical values and charts. This page displays a table with actual values, consensus figures, forecasts, statistics and historical data charts for - Government Bond 10 y .

In the USA it is considered certain that the US Federal Reserve (Fed) would buy government bonds in the event of a severe debt crisis. This means that these papers are subject to practically no risk of default. In extreme cases, they could only lose value as a result of rising or falling exchange rates. But that scares investors far less than a possible default.

In Europe the situation is different. The European Central Bank (ECB) is not allowed to help individual states that may experience financial difficulties. In fact, it does this with its purchases of government bonds as part of its monetary policy programs.

This became very clear in the case of the emergency program known as PEPP . It has a volume of almost 1.4 trillion euros and allows the ECB to buy papers from individual countries in a relatively flexible manner. Before the outbreak of the corona crisis, there was a relatively strict rule to adhere to fixed quotas for these purchases, which are based on the size of the respective economy and the population of a country. This rule was softened with the crisis.

Asian issuers chasing records in the euro bond market: Chart

 Asian issuers chasing records in the euro bond market: Chart © Bloomberg Rush to Europe (Bloomberg) - Bond issuers from Asia issued euro-denominated bonds with a value of 5.3 billion euros this month. This means that emissions from the region in the common currency have reached a record level since the beginning of the year. Borrowers worldwide are raising unprecedented funds to help combat the effects of the pandemic.

A long called for joint euro bond is back on the agenda, but German and Dutch resistance to calls for a 'coronabond' from many southern European states and the European Central Bank is "As long as the bulk of new debt from the crisis remains under national responsibility, rating concerns from

European government bonds carry more risk than U.S. government bonds in the current market environment because many countries in Europe are currently experiencing upheaval. This leads to a healthier outlook for the European government bond market and specifically countries in the Eurozone.

Basis of the euro capital market

On the other hand, there was a haircut in 2012 in the euro crisis in the case of Greece . The different high yields on government bonds in the euro area clearly show that investors are not ruling out a similar step for other countries.

The yield on German government bonds with a ten-year maturity is minus 0.5 percent, while that for Italy is plus 0.8 percent, despite the support from the ECB. The decision to set up a multi-billion dollar reconstruction fund has already strengthened confidence in the cohesion of the euro zone. But only the joint financing of these tasks can create a truly European basis for the euro capital market.

There are political reasons for not having such papers earlier. In financially more stable countries in the euro zone, there is great concern that joint financing could indirectly divert payment flows to the weaker countries.

pensions in the morning: pandemic sets weaker euro countries to

 pensions in the morning: pandemic sets weaker euro countries to (Bloomberg) - The bonds of the weaker euro countries suffered price losses on Monday, while the prices of bonds from the core countries hardly moved compared to Friday. The rise in yields on Italian government bonds was particularly pronounced. They fell between around four basis points at the short end of the yield curve and around eight basis points at the long end. The prices of the papers from the Iberian peninsula and Greece did not escape the pull of the Italian yields.

Get updated data about global government bonds . Find information on government bonds yields, bond spreads, and interest rates. Europe, Middle East & Africa. 10-Year Government Bond Yields.

Could the coronavirus pandemic force the European Union to break one of its biggest taboo and create a new form of EU -wide, mutualised debt? Called "corona bonds ", European leaders will today discuss whether they can help finance the fight against COVID-19 and the rebuilding of economies

In fact, most of the stable countries such as Germany and the Netherlands have benefited from crises in the form of capital inflows, which, however, have also depressed interest rates accordingly. A stronger bond would lead to an alignment of the conditions and the risks.

In the wake of the euro crisis, considerations arose to create large volumes of euro bonds with joint liability, which, however, has no political chances. Attempts to artificially create “safe assets” by dividing bonds into tranches with different levels of liability also found little support. They did not meet with approval from governments or investors.

More: The Eurozone lacks a safe security

Euro zone: The fall in inflation confirmed at 0.3% over one year .
ZONE-EURO-ECONOMIE-INFLATION: Euro zone: The fall in inflation confirmed at 0.3% over one year © Reuters / Regis Duvignau EURO ZONE: FALL INFLATION CONFIRMED AT 0.3% YEAR ON BRUSSELS (Reuters) - Consumer prices in the euro zone fell in November compared to the same month of the year latest, confirm data released Thursday by Eurostat. The inflation rate stood at -0.3% last month on an annual basis, a figure unchanged from October.

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