Monday, July 9, 2012
France Borrows at Negative Rate
Good news for France, which just borrowed €6 billion in short-term funds at an interest rate of -0.005 to -0.006 %. Not such good news for Europe, since the negative short rates now enjoyed by France, Germany, the Netherlands and a few other countries reflects investors' lack of confidence in Italy and Spain, which desperately need their money to roll over their existing sovereign debt and buy new issues. What's more, the ECB's decision to stop paying interest on deposits has money-market funds so nervous that some are limiting withdrawals. Once again, a European summit has failed to calm the markets for more than a few hours, and the flight to (relative) safety has become a massive transhumance of the investing herds and flocks.