This is something that will be watched when
governments issue their debt to try and finance deficits. Since all developed nations have large account deficits, it will be interesting to see how bond auctions hold up in a bond saturated environment. Not to forget that government bonds are caught in a yield to maturity conundrum, meaning interest rates have to remain low forever; so bond prices remain relatively stable. Of course a high yield doesn't attract many buyers and you then have oversupply when
issuing low yield debt. Unless you are Argentina selling
junk bonds ( ARS99 at 12.33% and ARS310 at 13.91% ) with a high yield.
Remember Argentina went bankrupt in 2002 and the Peso tanked.
And recently Japan ran into some problems from
Bloomberg:
re: Goverment Bonds
"The sale attracted bids worth 3.02 times the amount on offer, less than 3.03 at last month’s auction and the lowest since a ratio of 2.9 at the July sale. Ten-year yields climbed to the highest level in six weeks after the Nikkei newspaper reported that the government may sell a record 50 trillion yen in new bonds next fiscal year, citing comments from an interview with Finance Minister Hirohisa Fujii . "Total
FUBAR situtaion looming.
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