Treasury bond auction today!

 In Finance, Markets, News

Portugal’s treasury institute IGCP is to auction Portuguese public debt in the form of sovereign bonds to raise between €1Bn and €1.25Bn.

The government agency holds these auctions several times a year which aim to raise money to fund the day-to-day operations of the State in return for theoretically paying the bondholders interest on their bonds when they mature in five, 10 or 15 years time, holds the auction on Wednesday, 19 August.
This time the treasury is issuing short-term debt says the Agência de Gestão da Tesouraria e da Dívida Pública – IGCP and at negative interest.
The institution led by Cristina Casalinho is running a double auction of treasury bonds with a maturity in November 2020 and July 2021.
In the last auction on 15 July, the Treasury put €1.7Bn of short-term debt on the bonds markets with a maturity of six and 12 months and at negative interest rates.
So, the question is why would investors buy up Portuguese debt if they don’t get any return on their investment?
There may be several explanations. Investors may be counting on interest rates going up if the market situations deteriorate.
Investors who scoop up negative-yielding bonds are betting on the value of the securities to keep rising, in effect, wagering that there are other ‘bagholders’ or bond holders left holding bags of worthless bonds”
With the European Central Bank widely expected to restart their asset purchasing program, European bond-buyers could be relying on the central bank to hoover up their portfolios of negative-yielding bonds.
Although investors buying bonds with subzero interest rates are, in effect, paying for the privilege to hold on to an investment, that cost can be more than offset if the security’s price rises.
In July, an auction for €4Bn of 10-year German government bonds TMUBMUSD10Y, 0.658% sold at a negative yield of 0.26%, but at a premium price of 102.6 cents to the euro. The benchmark bund is now trading at a price of a 106.9 cents to the euro, meaning that investors who scooped up debt at last month’s auction would have reaped a gain of around 4% from the price increase alone.
“Everyone is buying this stuff like crazy, because there is too much money in the system from quantitative easing and too much money going to government bonds,” said Jim Bianco, founder of Bianco Research, in an interview with MarketWatch.
On the other hand, market participants say it is unclear if buying fixed-income securities in expectation of further price gains remains a sustainable trend.