Belgium, Bonds, Baguettes

In case you hoped getting to know what BBB rating really stands for, this is not the right post to find out. This one will give you an overview of this week‘s bond-concerned ongoings in the EU, ranging from madness regarding also the political situation in Belgium to various states emitting bonds in order to financing their budget.

Belgium

For some its an abyss what’s happening right now in Belgium. Walloons and Flemish are conquering Iraq if it comes to days without government which already counts 221 in Belgium. Political instabiltity leads to financial instability as Belgian bond market experienced this week. Rating dropped from ”solid” to ”’negativ” this week. Yield rose, price fell, investors sold their shares despite knowledge that Belgium is amongst lowest scores if it comes to debt growth in European comparison.

Significant rise in bond yield

If Belgium isn’t coping with its problems anytime soon, they will face a dramatic financial reaction to their political issues, as this informative blog post states. It will be a pity seeing this the country which has much more to offer than unconfident politicians and weed for everyone – legally. Follow Jeremy Clarkson to learn serious information about Belgium (*heavily coughing right now*)  in this video and tell me what you think about Belgium.

Bonds

Oh yes. There is no getting around. Bonds are and will be number one financial instrument to finance whole states – without alternative. (Reminding me of our Chancelor always stating that steps, taken by her, are “without alternative”). Of course there are alternatives, can you name some? However, following up on one of my latest blog post on the EFSF (European fund for shady financing, shady because some think it is Earth federation space force, hence having no idea what it European meaning is) I don’t want to withhold latest events:The fund shall now be used to buy Greek bonds.

Greek 10y bond yield

Insanity or cunning investment? High rate of return: high risk. I guess Greece won’t be locked out from the EU because they…. I can not come up with any reason except the old statement that partners should stand up for each other. In this case stronger EU members. Still, will Greece’s economy fail? (links to one of my posts stating that 50% of Germany’s manager think 2011 is the year that 1 country will go down.)

Baguettes

Different from the situation in weed – and olive country is the one in France. Thanks to AAA rating, high expectations and a baguette for free for every bond sold (I made that one up but it’s a nice idea though), France was able to collect € 9bn with the aid of inflation safe bonds with different duration. 3y bonds were oversubscribed 5.4 times, another indicator for confidence in wine-fanatic country. (Consumption scored highest in Europe in 2008). Got the bond-data from this Friday’s (21/01) FTD print edition.

Bonds were, are and will be considered as high priority external financing instrument for first-world governments, all over the world.

Did I miss something? Tell me what you think anyways. Enjoy wine, baguette and good cars as long as they exist.

rudi2020

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2 Responses to Belgium, Bonds, Baguettes

  1. vivipre says:

    I must admit I was not aware that Belgium has been without a functioning government for so long. Thanks for bringing up this issue.
    According to an article in The Wall Street Journal the lack of government did not harm Belgium’s bond sale last year as an economics professor explains: ”What is more problematic for the international bondholder is that if he’s asked to invest in a 10-year Belgian bond, he doesn’t know if Belgium will still exist in 10 years.”
    I agree Belgium should come up with an adequate solution soon to ensure long term growth and prevent ending up as another European country facing an economic collapse.

    You also did a great emphasis of the importance of bonds as a financing source and how stronger countries like France profit while others have to suffer from high bond yields.
    Shouldn’t Europe act as a family and support its weaker members? Maybe with the introduction of euro bonds to give weaker countries the chance to borrow money. Check out my last post “Euro bonds – the answer to the €-crisis?” if you are interested in this topic.

  2. This is a very good headline for your post! I really like it.

    As far as I remember, Belgium has been on the list of Euro-nations with high deficit and debt for years.
    If you think back to what Mr. Fester said:
    “When the Euro was introduced, Belgium was already struggling with its large debt…but the leading politicians and ‘designers’ of the Euro perceived this as a collateral damage”.
    It must be said that it is a bit funny that Belgium is focussed just now.
    Reminds me of the essence of “panic” which I already discussed with you in my post last November.
    Even funnier, I already mentioned Belgium in this post as being a candidate for a further “trouble-maker” on the markets.

    Belgium is a small member with little influence but it must be stated that as soon as most stable states such a France get into severe trouble, the Euro will definitely be on the edge of collapse.

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