It just shows how bad things are when Germany offers zero rate bonds. In other words a safe place to park your money as the shit hits the fan. Its a clear sign of a fear in paper. Spiegel Online reports:

For the first time in history, Germany issued long term bonds with a zero percent coupon rate on Wednesday. The demand reveals the deep concerns investors have about the euro zone and their desire for a safe place to park their capital — even if it costs them money to do so.

On Wednesday the German Finance Ministry pulled off a remarkable feat for a country in a threatened currency union: It issued €4.6 billion of two year bonds with a rate of zero percent. In other words, once inflation is factored in, investors are essentially paying to park their money with the German government.

And the remarkable thing about it was the demand for it.

According to German officials on Wednesday, demand for the zero percent bonds was robust and added that Germany does not intend to offer up bonds with a negative interest rate. “As such, a coupon of zero percent is the lower limit,” Reuters quoted a finance official as saying.

Still, it seems likely that, with investors looking for safe havens for their money, even negative interest rate bonds might sell. “Many investors are putting their money only in places where they are guaranteed to get it back,” Commerzbank analyst Alexander Aldinger told the Berliner Morgenpost. “For a large degree of security, investors are willing to give up returns.”

Even while borrowing costs have spiked in other euro-zone countries, rates on shorter term German bonds have already hit zero and even ventured into negative territory, meaning investors have been paying the German government to hang on to their cash. Rates on longer-term bonds have been trading consistently below the rate of inflation.

The zero percent bond issue is just the latest sign that concern about the crisis facing Europe’s common currency is rampant. As are worries that the situation could become much worse before it gets any better.

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