Investors pay to lend money to EFSF bailout fund
Investors accepted negative interest rates for the first time to lend money to the EU's bailout fund on Tuesday, according to the German central bank, which managed the issue.
The Bundesbank said in a statement that the European Financial Stability Facility placed 1.488 billion ($1.8 billion) worth of six-month bills at a yield of minus 0.0113 percent, the first time the rate on such an issue has been negative.
A negative yield means that investors actually pay the EFSF to lend it money.
Demand for the issue was strong, with investors bidding for a total 4.425 billion euros worth of bonds, bringing the so-called cover ratio to 3.0.
While the bond markets are pressuring the likes of Spain and Italy, pushing their borrowing costs sky-high, the bailout fund has continued to attract solid demand.
The EFSF, which was established with a total lending capacity of 440 billion euros, is to be replaced eventually by a permanent rescue fund called the European Stability Mechanism, with 500 billion euros of firepower.
The ESM was due to come into force on July 1, but it has suffered delays, notably owing to legal challenges in Germany.
© 2012 AFP