Negative-Interest-Rate absurdity is another “rabbit out of the hat.”
By Don Quijones, Spain & Mexico, editor at WOLF STREET.
For the second time this year, Spain’s caretaker government just managed to sell 50-year bonds in a €3 billion ($3.4 billion) deal. Despite maturing in the year 2066, when many of us won’t even be alive and the duty to pay back the debt (assuming it still exists) will have been handed down to our children’s children, the bonds will pay an annual interest rate of just 3.45%. Not only that, but the issuance was over-subscribed by €7 billion.
This is a mind-blowing turn-up for a country that just four years ago needed an unprecedented bailout from the Troika to save its saving banks and avert total financial collapse. It is also a resounding testament to the power of central bank policy to turn economic reality on its head.
Less than three years ago, when Draghi had only just begun doing “whatever it takes” to save the single currency, the Spanish government had to pay a 5% yield to get investors to buy their one-year bonds. Now investors are willing to take 50-year bonds off the government’s hands in exchange for an annual interest rate of 3.45%, despite all the attendant risks involved.
While the Spanish economy has improved somewhat since then, that is largely due to the fact that the government has sacrificed long-term stability for short-term growth, going so far as to plunder half of the nation’s social security reserve fund in order to keep spending at its current levels. The remaining half is exclusively invested in Spanish bonds. Even Brussels now admits that Spain’s public debt is out of control.
To make matters worse, Spain doesn’t have an elected government to speak of and could struggle to form one even after the next round of elections, on June 26.
None of that seems to matter, though. Global investors, mostly from Germany, Austria, Switzerland, the UK, Ireland, US and Canada, are now so desperate for yield that they’re willing to hold their noses, say a few Hail Maries and place millions of euros of their clients’ money on a half-century gamble.
The longer the maturity a bond has, the further its value will drop in response to a rise in interest rates.That hasn’t stopped investors snapping up super long-term bonds from a number of European countries. In April, the French treasury flogged €9 billion of debt, with one tranche maturing in 2036 and the second in 2066. The interest it paid on each tranche was just 1.25% and 1.75% respectively. Italy, home to banks that are stuffed with as much as €360 billion of bad debt, is also “evaluating” demand for a possible 50-year offering. Some Treasurys have gone even further, with Ireland and Belgium both selling €100 million of 100-year bonds this year.
Obviously, none of this would be conceivable if it weren’t for the ECB’s increasingly unconventional interventions in the financial markets. Thanks to its rampant government (and soon to be corporate) debt buying, free bank lending and negative interest-rate setting, the global stock of negative-yielding debt is estimated to have reached €8.26 trillion by May 1, up from €4.92 trillion at the start of the year.
This development has left pension funds and insurance companies facing an unenviable dilemma. Either they hunt for higher returns in the much riskier junk bond markets or they fish for super long-term government debt. The riskier the nation, the more lucrative the returns. “For investors like insurance companies and pension funds that need yield, this can be a natural hedge for their long-dated liabilities,” said Lee Cumbes, head of public sector debt at Barclays PLC.
At its last monetary-policy meeting, in Frankfurt in April, the ECB decided to leave policy unchanged, leading some investors to fear that the central bank may have run out of tricks.
Fortunately, ECB Governing Council member Vitas Vasiliauskas was on hand to allay those fears. “Markets say the ECB is done, their box is empty,” Vasiliauskas, who heads Lithuania’s central bank, said in an interview with Bloomberg on Tuesday. “But we are magic people. Each time we take something and give to the markets — a rabbit out of the hat.”
It sounds insane — and it is — but it’s also true: today’s markets, in particular Europe’s, have been reduced to central bankers pulling rabbits out of hats. A clown show, so to speak, with global investors and their algorithms waiting with baited breath for the slightest clue as to what the next trick will be.
The problem with running a huge, continent-wide financial system this way is that it tends to irrevocably change the nature of things, occasionally for good, mostly for bad. Fundamentals no longer apply (or at least their impact is delayed) and unintended consequences and unexpected distortions — such as triggering a stampede of normally conservative investors into inherently risky investments — abound.
Another consequence of the ECB’s magic quackery is that it completely undermines the traditional disciplinary role played by interest rates. Make interest rates ridiculously cheap for governments with a well-deserved reputation for over-spending (such as, say, Spain) and the inevitable result is that the government begins borrowing more, to the point where the nation’s public debt almost triples during an eight-year period. Yet despite all that, interest rates on Spanish debt continue to plumb new depths.
In the complete absence of any traditional financial disciplinary mechanisms, the EU is now resorting to political measures to keep eurozone economies in line. As Euractiv reports, the European Commission has just decided to launch sanctions against Spain and Portugal for not making sufficient effort to cut their deficits. Spain’s 2015 budget deficit was 5.1% and Portugal’s was 4.2%.
The Commission is also considering doing the same to Italy for failing to reduce its public debt (132.7% of GDP). According to EU rules, the fines could be up to 0.2% of GDP, which in Spain’s case would be the equivalent of around €2.6 billion.
Who will end up paying the fine? Why, Spain’s already cash-strapped taxpayers, of course. Naturally, the fine, no matter how large it is, will increase Spain’s public debt and budget deficit. In the meantime, the ECB’s magic men and women will continue driving interest rates on that debt lower, making it even cheaper for the government to borrow more. If, once again, the government goes overboard (which it no doubt will), the taxpayers will be fined anew, creating even more public debt.
Rinse and repeat, until, finally, fundamentals re-apply. In the meantime, sit back and enjoy the scary clown show. By Don Quijones, Raging Bull-Shit
Just shocking to Draghi that Germans dislike stocks, with the DAX down 21%. Read… Wrath of Draghi Hits Germans who Refuse to Blow their Savings
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I enjoy your articles Don Quijones. If only governments had to have some discipline about their spending…
Actually that can easily be arranged. All that has to happen is citizens have a general understanding of what their government is doing and hold their representatives strictly accountable for ethical & moral behavior.
But people get distracted (save the whales, global warming, Prince died this week, the new iPhone has 18M pixels, Lady Gaga’s meat dress). Without negative consequences, negative (or self serving) behavior RAPIDLY increases. Case in point: Venezuela & Mexico (both have huge oil reserves).
The next thing you know, a bunch of poor people are standing around asking how this could have possibly happened…
I agree people get distracted but its for a simpler reason. People are busy trying to make a living and taking care of thier children and possibly their parents. People are tired. Many people dont keep up with whats going on around them in terms of finance but they do see thier money doesnt stretch as much as it used to. Many people dont feel they can make a difference. Its easy to see why people feel this way.
I keep up with alot of things (finance, natural health, technology, educating my children-school system is failing us) BUT it takes alot of time and effort and success is not guaranteed. I rarely watch TV unless its a documentary that I deem to be valuable. I rarely listen to the radio because I cant consume a constant diet of negative news.
So all this to say that there are people that care and are aware of whats going on but they are tired, dont feel like they can make a difference (not true) and they sleep, or party or drink (maybe all of the above) on the weekend to escape the daily grind/routine.
ECB: Robbing the impoverished middle and working classes out of their hard earned savings will make them spend more money, right? RIGHT?
Mind bending insane nonsense devoid of any reality. The world stands on the verge of social, financial, and ecological disaster and this crap is the best we can manage as well as the choice of either a psychopath or narcissistic fool as potential leader of the USA God help us
Which one is which- according to Barry Diller the Donald is both.
Indivindual responsibility has extincted…while collective rseponsibility is not invented yet.
Does anyone have a view on a potential end game? In principle, Spain et al can continue to issue debt and the ECB continue to print money indefinitely to soak up bonds and maintain artificially low rates. Furthermore, the ECB cannot actually call an end to QE, as rates for the likes of Spain, Portugal, Italy and Greece would spiral, collapsing the value of all those existing bonds. The US were able to halt QE on account of reserve currency status and sufficient faith in US debt but this surely would not be the case for Spain, Portugal, Italy and Greece. So will money printing now continue until debt to GBP grows to 300%+, as Japan is leading the way?
The ECB, is, like the US, but to a much larger degree, trading in its position in the SDR. It can if necessary, print away its debts.
Which is why china desperately wants into the SDR, so it can do the same.
As the “brics” attempt to form an alternative “Reserve” Basket failed abysmally.
Basically, as all of their currency were regarded as toilet paper. Based on their extremely shaky, long term and Historic, national economic fundamentals.
Should another “Reserve Basket” develop with stable fundamentals. In which the market has “confidence”, A problem would slowly develop in the US.
A catastrophe would rapidly develop in the EUR Zone.
There is more realistic chance of another reserve block developing, than the CNY replacing the US $ in the medium term, as a held reserve.
1860 -1898 (App) Mexican silver dollars were still a recognized, and used as, secondary reserve currency, beside the Sterling. But they were solid silver.
There has been talk of several nations minting unvalued, 1 Oz and Part Oz silver rounds, and using them in a trade basket, based on the silver value in them. Supported by an agreed daily silver fixing.
The SDR basket is ultimately, as stable as the “Confidence” in it.
As the US dollar % in the SDR drops, so may the confidence in the SDR.
It is not if the $ be replaced as “The Reserve” currency, but when, and by what.
Being in a “Cash”position in a Financially unstable world, also becomes a question of. Whose Cash.
“The SDR basket, is ultimately as stable as the “Confidence ” in it.”
Precisely. Confidence amongst all parties is the key ingredient to deciding what money will be, because history has shown that anything can be money as long as all parties have confidence in it.
Some of the earliest (most of them?) forms of money were commodity based. I believe the likelihood of a world reserve currency ending up closely tied to a commodity is substantial. To get there from where we are today equals a hell of a lot of chaos IMO.
I wonder ‘when’ too because it is not possible to print the things people want (Not counting 3D, which like everything else is overhyped)
As long as people accept the pieces of paper for goods, the game rolls on.
So the areas to study are those where people balked.
An extreme case occurred when Mobutu, The Philosopher and Supreme Guide of Mobutism, just added a zero (or 2) to the biggest note, and used it to pay the army. (Always pay the army- but not like this)
But the merchants wouldn’t take the notes and a period of near civil war
resulted. Or in Zimbabwe- where notes reached the 100 billion level and after using the US$ as a black market or real currency the state gave up and dollarized- abandoning its own currency.
The reason for notes with numbers in the billions is that it costs some money to print money, so it’s tempting to print one large number note instead of many small ones. When a currency can no longer buy enough paper and ink- that is the end.
The US dollar has had periods of weakness. That was in the 80’s when gold and silver soared. A problem for the US$ was the Deutsche mark, like the Swiss franc was perceived as more attractive and also rose.
Today it’s easier to be the cleanest dirty shirt.
The weakness was overcome via international agreements but mainly by then Fed Chairman drastically raising interest rates- up to 18 % if memory serves. The Chicago Commodities Exchange also cooperated (or were told to) by not allowing accumulation of silver, thwarting the plans of the Hunts of Texas, and the Sauds of Saudi Arabia to bring out a monster issue of silver backed bonds. This was so obviously a potential competitor for the unbacked US$ that it might have been when Volcker ‘snapped’
So if that was to happen again, with the debt to be serviced at today’s levels- that might be an end game of sorts.
This printing fiat money stuff lasts until some magic tipping point is reached and hyperinflation sets in (real-time case in point Venezuela).
The magic tipping point is hard to see n advance, but say to see after it happens (USA sub-prime lending in 2000-2007/8).
Things can get bad fast (case in point Venezuela & Greece) if your country doesn’t make/sell anything that anybody else wants. The USA stop pumps out stuff the world will pay for, so our QE is somewhat shielded. This is financial Russian roulette.
Japan is somewhat unique in that it has a high internal savings rate and it’s citizens own most of it’s debt. Doesn’t mean they can’t (financially) blow up.
The Spanish govt should turn the entire bond market into a giant lottery. For less than $10 US they could sell zero coupon bonds yielding more than 10% for 50 years. It is a bet most people would make with an almost guaranteed payout. People could buy them for their children or grandchildren or even to fund their own retirements. The govt won’t have to payout the money for 50 years and inflation would mostly overtake the yield. The major risk is that the govt won’t be around in 50 years to pay them off but there are no guarantees of that anyway.
Even I could afford to invest in that.
Lotteries are a great way to solve government problems.
My Grandmother was born in Italy in 1924, two years after Mussolini took power. She’s still alive and in good shape and told me a very funny story on the matter.
The Italian railways (fully State-owned) owned the land upon which their tracks were build. At the close of the XIX century, Black locust, a tree from Appalachia, had been introduced to Europe and very soon became invasive. As nobody could touch the land owned by the railways, by the late 1920’s it had become overgrown with Black locust, which posed serious safety hazards, especially in light of the ongoing electrification of many railroads.
Of course the Railways could have simply had the trees cut, but soon a variety of schemes were floated, including simply opening the land to anyone with an axe and a saw (chainsaws had just been introduced in Germany and were neither cheap nor widespread).
In the end, the following scheme was adopted.
Land to be cleared was divided in lots, and people could buy tickets to a lottery whose winners had the right to cut and take away everything they wanted for 10 years. It was a smashing success, so much Black locust was completely eradicated from many areas. It has staged a comeback recently but only because people cannot hold a chainsaw.
My great-grandfather (my grandmother’s father) was a railway worker and among his duties he had to make sure only lottery winners or those authorized by them entered the lot and to keep lot boundaries marked to avoid disputes.
Well us USA Boomers (I’m one…) have pretty much sapped the financial vitality of our children, so I guess it’s time for some 50 year bonds to start stealing from our grandchildren.
Coming later this year, the Cen Bond, a 100 year issue? After that, perhaps the multi century IEX bond, (Interplanetary Exploration) based on resource acquisition from other planets. Pfffft. 50 year bond. Come on, lets show some real creativity with debt.
ps- I hope nobody from the ECB is reading this :-)
Don’t laugh! About a year ago, at one of those NIRP bond bubble peaks, Mexico was able to sell 100-year euro bonds at a yield of 4.2%. It doesn’t even control that currency. And Draghi won’t buy them to bail out the institutions that bought it.
In 1997 Safra Republic Holdings, a European holding of Republic National Bank, issued 1000-year bonds.
We all know what happened: two years later the bank owner, Brazilian billionaire Edmond Safra, was murdered in bizarre circumstances, and the whole outfit was unloaded by the rest of the board upon HSBC. In 2001 Republic was found guilty of defrauding customers and slapped with a monster fine/reparation bill.
Already at the end of the Clinton Presidency, Treasury was so worried about 100-year and 50-year bonds it proposed interest to be made non-deductible 40 year after issuance. It was rejected by Congress.
Truth to be told, 100-year bonds are nothing new: they were first issued in the 1880’s by railroad company Canadian-Pacific, but yielded a whole lot more than present ones.
Belgium and Ireland have already issued 100-year bonds… more will follow.
This is a classic case of caveat emptor: EMU (European Monetary Union) is built on far shakier basis than anybody would like. It’s already losing ground to the yuan as a mean to settle international transaction (the yuan’s growth here came exclusively at expense of the euro) and it’s very nature works against it.
The present, very EU/EMU-friendly governments all over Europe are already under strong pressure by “skeptical” parties. An iron hand, like Italy is using with M5S and Greece with Golden Dawn (look out Podemos, FN and AfD: you will be next) will buy years, not decades.
Not even the USSR lasted a century: the EU, its spiritual heir (in Solzhenitsyn’s words “a USSR with well stocked shops”) will last far far less.
Thanks for schooling me up & giving the perspective found in your post(s). It’s a tough job teaching this old forest traveler the mechanics of the “outside” world.
Bond yields consist of 3 components
2. A real return above the inflation rate
3.Credit risk of the bond issuer
Even though ALL governments have an strong incentive to understate the true inflation rate in their officially published numbers,inflation in the Eurozone is probably running below the %3.45 rate ,so there is some real return with these bonds provided that the inflation rate remains at current levels.I understand that this is a very questionable long term assumption,but the market does not seem to be worried on this point.
Then it boils down to the credit worthiness of the issuer.No ONE ,I repeat NO ONE thinks that Spain or Greece or Portugal or a number of other countries can EVER pay back more than a small portion of the principal of their debt without substantial inflation ..And without the elixir of the actions by the Central Bank,bonds such as these issued by Spain would be virtually unsaleable at almost any price.But the market seems to think that with a keystroke the Central Bank can create money out of thin air and purchase virtually all bonds ( and maybe ETF’s ,stocks.ETC) for an indefinite time into the future .As long as the market retains this confidence in the Central Bank ,the game can continue.But just like the game of “musical chairs” the music does eventually stops and the market will realize that the emperor has no clothes and price of bonds will be decimated as default will be inevitable. When this will happen and what the catalyst will be is guesswork.I am amazed that it has gone on for so long
Your #1 item should read: “expected inflation rate.” With short maturities, there’s no difference. But once you talk about 10-year, 30-year, 50-year, or 100-year debt, the “expected” inflation rate over the term of the debt is what matters, and is normally imputed into yields. QE, ZIRP, and NIRP have had the effect that whatever the expected rate of inflation is doesn’t matter anymore.
Yes ,you are obviously correct that the inflation rate is the inflation rate over the term of the debt.And yes you are again obviously correct that QE,ZIRP and NIRP have distorted the factors that go into determining yields.
But let me now play the devils advocate.As long as the market retains confidence in the Central bank and as long as the Central Bank continues its policy of buying debt ,what difference does it make if countries run bigger and bigger deficits .Then taking the idea that deficits are meaningless to its logical conclusion ,why is there any need for taxes ?
I know that in the US ,the FED can only buy debt in the “open market”,basically through the primary dealers.But is there a similar mechanism in Euroland.?And what is to prevent the Central Bank from buying ALL newly issued government bonds directly from those firms who have just purchased them. Then the Central Bank can in essence directly finance any deficits .
Just printing money to fund the budget or part of the budget, and to buy the outstanding debt, will eventually lead to a cataclysm for the currency (for example, Argentina-type inflation of 25%-40% a year; or worse, Zimbabwe-type inflation) … not right away, but over time…
In Argentina for example, apartment leases are negotiated in dollars because the peso loses value too fast, and no one trusts it anymore. Then every month, you pay in pesos, based on the current exchange rate. This is what a cataclysm for the currency does: it destroys it.
So somewhere down that road that you describe, all heck breaks lose and bondholders get wiped out through inflation and devaluation, along with savers and a lot of other investors, retirement funds, etc.
Bonds with maturities of 50 or 100 years have a long time for this to happen.
The West refuses to admit its loss of power and influence to the East.
Europe is sliding into third world status.
That is an accurate assessment, and well stated in its description. Thank you!
“…the global stock of negative-yielding debt is estimated to have reached $8.26 trillion by May 1, which is equivalent to 23.6% of global fixed-income assets.”
calculating from this, total global fixed income assets are $35 T.
But total global public debt is like $58.7 T And that’s not all of the global fixed income assets is it?
So where does the global fixed income assets number in the article come from? Or am I misunderstanding something?
Thanks, Tim. I’m communicating with DQ about this. We have identified two problems.
1. DQ converted USD values to euros (since the whole article was in euros) and in two instances forgot to change the $-sign to €-sign. So the numbers should read: €8.26 trillion and €4.92 trillion (with euro signs). I have now fixed this.
2. But this still doesn’t resolve the problem with the percentage being wrong in a big way.
So I went back to the original source (WSJ, whose link I accidentally dropped when I posted the article). The percentage is based on this sentence in the WSJ article:
“The ECB’s action helped to increase the stock of global negative-yielding debt to $9.4 trillion as of May 5, according to strategists at Bank of America, equivalent to 23.6% of global fixed-income assets. That is up from $5.6 trillion at the start of the year.”
Note the dollar numbers that DQ converted to euros.
Then note the phrase: “equivalent to 23.6% of global fixed-income assets.” If your number of $58.7 trillion is correct (looks like it), then the percentage should be 16%.
So I agree, something is off. It could be the WSJ or BofA got something wrong.
To fix the article, I have removed the percentage since I’m not sure what the correct percentage is.
Thanks again for bringing this to our attention.
And IG corporates? I’m having difficulty getting a number for global IG corporate debt, but it’s looking to be in the $50T+ range. Total high quality fixed income assets over $100T (sovereigns+IG corporate)?
I don’t have any good figures on global corp bonds, of whatever grade. But in the US alone, as of year-end 2015, there were outstanding (all grades):
$8.7Tn in mortgage-related bonds (commercial and residential, and I would assume it includes Agency bonds),
$8.2Tn in Corp bonds,
$2.8Tn in Money Markets (short-term corporates),
$1.3Tn in asset backed securities.
as per SIFMA http://www.sifma.org/research/statistics.aspx
The US has by far the largest corp bond market in the world. Many other countries, including Japan and Eurozone countries, rely more on bank debt.
Which brings us to an expansion of the theme: whether or not to include loans in the calculus… which then should include CLOs (securitized leveraged loans).
So on a global basis, when all this is added up, it’s going to be a very big number.
Be interesting my guess is at least 30 – 50 years x global GDP.
What you may arrive at is and indication of how much future “growth” we have borrowed.
which will give an indication of how may flat decades we will have whilst we pay back the borrowed growth.
Unless a whole bunch of the global NPL’S get written off.
Whatever the exact total of global debt outstanding is, we know it’s HUGE, and we know it ballooned at a blistering pace since the Financial Crisis when QE, ZIRP, and finally NIRP infected the brains of executives, investors, and governments alike.
I agree, what little economic growth we’ve had since the Financial Crisis, globally, it was borrowed from the future.
And the NPLs – think about this: if interest rates are negative, would NPLs ever have to be written off? You could just refinance them at zero interest. Then it doesn’t matter whether the borrower can make interest payments because there would be no interest payments. So no NPLs. “Free debt infinity.”
We have entered truly absurd times.
Zero rates are an interesting game.
Longer term what do pension funds Etc do, when this hits, apart from implode, and leave their beneficiary’s with nothing.
Extending NIRP, shareholders, expected to Physically pay companies, for the privileged of holding shares??
Why would anybody but a CB roll a NIR loan??
How is the IRS going to view all this NIR losses deducted against tax?
Admittedly we havent see NIRP seriously move outside CB ‘S and Treasury’s YET.
What is going to Happen when it starts to Seriously hit at at main street combined with, Bail in risk??
A devaluing pile of molding $ notes, or scrap, Bronze, Copper, Tin,Lead, is still more attractive, than a NIR, potentially bailed in, bank balance.
I dont like him either.
His associates toasted lots of my relative’s, but, he is sometimes relevant. I will try harder.
The late 19th and 29Th century’s produced some titanic figures. Most of them bad.
“those who do not study history, are bound to repeat it.
Just like in a lot of financial chart’s.
I see a huge amount of Deja vu in the world today.
Of the frightening Kind.
I understand, and thanks for your understanding, d! I will delete these messages.
Thank you, Wolf;
Here’s something, not this year, but not too old, 2015, Q2 2014,
Some other things I’ve seen are indicating similar ball park numbers for global corporate, ~$55T, like the McKinsey number 56T. And high yield said to be only a very small part of this.
Total household+corp+gov+financial = ~$199T in their report, 286% of GDP. Ouch!
I calculate Spain’s P/E is greater than AMZN’s! :)
Enabling the beast which steals from investors via misrepresentation.
A few more questions
What exactly is helicopter money what is the specific mechanism for distribution of helicopter money to the larger population .
How does helicopter money differ from across the board tax cuts
Helicopter money is still a “concept”.
The theory is that Newly physically printed money /Digitally created money should be distributed directly to the citizens
This increases the Physically money supply at the bottom of the economy and stimulates it.
One of the issues in the theory, is, how do you ensue that those most at need, at the bottom, receive it as many of those at the bottom, the most needy. Do not always have bank accounts, homes, addresses, or even officially exist in the “System” distributing the helicopter funds.
Realistically you want cash to appear in hand in some way, this will encourage spending of said cash,
At tax cut.
Will reduce, directly and immediately State/National revenue robbing right hand to feed left. Always counter productive unless balanced with an increase, or other spending cuts elsewhere.
The object of Helicopter money is to give to all, evenly, and increase the size of the cake. Not move parts of the cake around, which is what tax cuts do.
“it doesn’t matter whether the borrower can make interest payments because there would be no interest payments. So no NPLs. “Free debt infinity.”
I wonder if this can’t be called a “Debt Jubilee”, or better, free handout to someone (banks?)?
I’d call it “monetary insanity.”
I agree, it seems insane. Imagine being able to borrow at essentially no cost like Unilever borrowing at 8 basis points for example, in a currency that may no longer exist in 4 years?
Doesn’t this qualify hands-down, as a compelling deal?
Say you were Company XYZ for instance, and could refinance your debt at near zero rate (paying infinitely more than government rate)…. and as the cost of capital -> zero only principal is owed in a currency that’s unlikely to appreciate?
But you’re paying infinitely more… Conundrum or jubilee, not sure which but seems like a good deal assuming you can service the pricipal
You would still need to service the principal but if the currency -> zero then your principal -> zero.
Short the euro, essentially, right?