Emergency talks on the Euro crisis are now being planned by the G7 – and this is being reflected in first-time ever historic lows on German bund yields.  Investors are now paying for the opportunity to retain the principal value of their investment.  Yields have turned negative.  Yes, let me repeat that.

The 2-yr German bund yield has turned negative.

German Debt Near Record Highs

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This means that German debt is near record highs.  Yields turned negative for the first time on Friday, June 1, 2012.  How is this possible?  Simple.  Demand becomes higher than supply, and no yields are needed to attract investors.  This causes the prices of the bonds themselves to soar.  Meanwhile, 10-year yields fell down to a historic low of 1.14% on Friday as well.

The European Central Bank is holding an emergency conference on Wednesday, coming out of a long holiday weekend in Britain.  G7 finance ministers and central bank governors are expected to meet to determine what monetary and fiscal decisions should be made to take care of the sovereign debt and banking crisis quickly spreading throughout the Eurozone.

Rumor has it that Spain will not be able to bail out its banks, especially given that foreign investors have all left and it is dependent on its domestic banks to buy its debt – and the yields on Spanish bonds are at historic highs.  In addition, Spanish depositors are shifting money abroad at the fastest historical rate ever. Greece, meanwhile, will see an election in two weeks that might make the #Grexit a reality.  Some expect the ECB to respond by lowering rates, but these analysts are in the minority.

Folks, coupled with the situation in Italy, this is not good at all.  The Euro is on shaky ground indeed.

Tagged as: 2-yr, Angela Merkel, banking, bonds, bund, central banks, crisis, debt, ECB, Euro, Eurobonds, eurocrisis, europe, Eurozone, futures, G7, German bund, Germany, Greece, grexit, Italy, negative yield, notes, politics, Spain, yields