Yesterday’s Auction Fail

I had some discussions with someone on yesterday’s post Today’s Auction Fail, which led me to find out how the German Finance Agency acting for the account of the German Government, through the Deutsche Bundesbank acted with confidence in rejecting a good proportion of bids in yesterday’s auction.

It seems, the German government holds a lot of financial assets, which could meet its financing needs for a good amount of time.

The Bundesbank Monthly Report, September 2011, Statistical Section, III, Consolidated financial statement of the Eurosystem, Liabilities shows that the German government has only €0.2 billion of deposits.

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However, it has a large amount of deposits at MFIs – Monetary and Financial Institutions, or banks in short.  Page 116 of the same report shows that the German government deposits at banks was €35.6 billion:

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Germany’s International Investment Position shows a large amount of external assets held by the German government.

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According to Item III, the Government of Germany (which does not include the Bundesbank) held assets equivalent of €229.8 billion abroad at the end of 2010.

Some of the data is not the latest but to conclude, the German government has sufficient assets to not worry about auction failures and can reject bids easily.

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