STOCK MARKET WATCH - Wednesday, 11 January 2012

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47. Profiting from Pain - Europe's Crisis Is Germany's Blessing

http://www.spiegel.de/international/europe/0,1518,808248,00.html

It's every debtor's dream. When asked for a loan, the bank not only agrees, but actually pays the borrower for their patronage. It sounds like a fairy tale, as though the laws of the market economy had been suspended. But on Monday it really happened.

The debtor in this case was the German government, which borrowed €3.9 billion ($5 billion) for the next six months at the unbelievable interest rate of -0.01 percent. Even the German Finance Agency was stunned. "This has never happened before," a spokesperson said.

The Finance Ministry should be pleased. In the last four years, they've had to shell out around 1.8 percent in interest for such bonds. But recently even interest rates on German bonds with longer maturities have decreased significantly. The federal government is saving a bundle.

The reason for the windfall? Amid the ongoing euro crisis, Germany is one of the few borrowers that are still regarded as a safe haven. Many investors would rather lend the government money at bargain-basement rates than risk losses.