Athens, Greece (AP) — More than a year after Greece exited its bailout programs, investors — in a historic first — have bought its short-term debt at a loss.
The country’s debt management agency said Wednesday it raised 487.5 million euros ($535 million) selling 13-week treasury bills, for which the yield was -0.02%.
That means investors will get back slightly less than they paid, following a trend in other European countries.
My friends, we are approaching a moment of truth in the financial markets.
The Greek government, which was shut out of debt markets in 2010, is now selling short term bills at negative rates.
As we know from both text books and many years of experience, interest rates measure two things; the demand for money, and the reward for risking hard earned capital.
In 5000 years of monetary history, negative rates have never occurred until the very recent past, brought on by unprecedented money printing by central banks.
The entire concept of a negative return on capital is a logical contradiction itself.
Why would anyone put money in the bank, or bond market, knowing they will get less than their original capital in return?
Only thieves and money launderers might stoop to such desperate measures.
While gross imbalances and chicanery can go on longer than one expects, several of the charts we follow on this blog shout warnings and caution:
A large coil pattern has formed suggesting a large sell off is likely in the S&P 500.
A rounding top appears to be forming in this momentum ETF.
The spike in short term rates in this LIBOR replacement suggests inter-bank liquidity is a big problem. The Fed even introduced 2 week term REPOs to keep rates down and cash flowing.
This is not a sign of a healthy financial system.
A weekly chart reveals a large bear flag that is starting to break down.
If the vampire squid starts to rapidly unwind, it is likely to bring other institutions along for the ride.
A negative feedback loop appears to be drawing liquidity out of the system. The implications suggest deflating stock prices, spiking volatility, and a rotation into safe havens such as gold and the Japanese Yen. The next few weeks in the market will be telling.