The bubble in government bonds is finally bursting

By Andy Duncan

November 28, 2011

Here is Detlev Schlichter with his take on the German bond auction failure:

Here’s a quote to tempt you:

“While the math seems to be clear, the desire to believe in the infallibility and omnipotence of the state, which in our secular age has become the new deity, is powerful and may keep those government bonds bid for a while longer. Who knows? But when the ice breaks, this is surely one of the major trading opportunities in this unspeakable financial mess, maybe the short of the century. In this context, the events of last week were meaningful. Reality has finally caught up with German Bunds. The poor price action in Bund futures is indication that German government debt is losing its safe haven status. Fiscal concerns are now engulfing ‘the core’ of Europe. Again, investors desperately hold on to their belief that ‘safe havens’ exist somewhere out there, so they are stupidly piling into Gilts and Treasuries. Soon these will make an excellent short as well.”

You might also want to read these two articles for an interesting ‘conspiratorial’ background to the excellent piece above:

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