The German 10-year bond is now trading with a negative yield. That means you pay the Merkel government a dividend to lend the Germans your money.
The engine that drives the EU is now making a slight profit on its borrowing costs.
The fear of the Brexit — Great Britain leaving the EU and the euro — has institutional investors flocking to sovereign debt to insulate themselves from volatility. The US 10-year is now at the 1.5% level.
My biggest concern is Deutsche Bank. Yes I just wrote and produced videos detailing the suicides associated with the bank, but the German national bank has a huge derivative exposure totaling $50 trillion by last count.
So how many of these derivatives are ties to the German 10-year being positive. The stock is trading at $14.95 at the open, which is an all-time low for its US ADRs.Shares are down 52% over the last year.
This could be the beginning of a Lehman Bros. moment for the EU and Mario Draghi.
Achtung! it’s time to pay attention to the troubled German bank.