What's German for over-sensitive?
The Bundesbank seems to have taken Wednesday's failed auction of bunds badly. The way the German central bank tells it, it wasn't a failure at all that only two-thirds of the intended €6bn was raised. "Underbiddings have occurred from time to time in recent months and cannot be seen as a general mistrust in Government securities," today's (unusual) statement said.
So what happened? It is "an extremely nervous market environment" and some investors may already have enough long-dated bunds on their books already: "Therefore it has to be regarded as a single event and cannot be seen as a warning signal for future issuance."
The Bundesbank may turn out to be right, and it may be overwhelmed by demand in the next auction. But telling bond market investors how to interpret the result of an auction is rarely a sensible strategy. Come on, it is hardly outlandish to suggest that the eurozone debt crisis may be affecting the price investors are willing to pay for German IOUs – and may continue to do so, especially if intervention by the European Central Bank continues to be ruled out. The Bundesbank would be best advised to say nothing.
