The falling cost of protecting against
inflation in the German bond
market portends a deeper slowdown in Europe’s largest economy, signalling
the effects of the continent’s debt crisis are edging closer to the
core.
The two-year breakeven rate, a gauge of
inflation expectations, dropped to minus 0.45 percentage point for Germany from 1.04 percentage
point a year ago, and has remained negative since the end of May. The rate
reflects investors selling index- linked bonds in favor of regular securities
because they reckon consumer prices will
start declining.
“Germany is most probably heading for a
recession,” said Humayun Shahryar, chief executive officer of Auvest Capital
Management Ltd., a fund company in Nicosia, Cyprus, overseeing $100 million. “We
are going through a debt crisis inEurope, and massive global
economic slowdown. I’m not sure how Germany will be able to escape
that.”
As the biggest contributor to bailouts for
indebted euro partners, the risk is that economic travails at home make it even
harder to convince German voters to loosen their purse strings just as yields on
Spanish bonds suggest the country will be next in line for a rescue.
German exporters Puma SE, Europe’s
second-largest sporting- goods maker, and Siemens AG, the region’s largest
engineering company, both said this month they are suffering from the debt
crisis as sales and orders fail to meet expectations. Eight of the 17 euro
nations are in recession.
Already Slowing
The year-on-year growth rate for the
German economy, which accounts for 27 percent of the euro region’s gross
domestic product, has fallen for four consecutive quarters.
I gave a very stern warning concerning the over reliance on Germany for
economic stability in January via The
Biggest Threat To The 2012 Economy Is??? Not What Wall Street Is Telling
You... - to wit:..."
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