In an ominous sign of the malignancy of Europe’s financial contagion, Germany held a bond auction Wednesday to which few buyers showed up. Commercial banks bought just 3.64 billion euros of the 6 billion euro auction, forcing the Bundesbank to retain 39% of the debt, a rate of retention Germany’s central bank has not seen in over 12 years.
Throughout Europe’s financial crisis, Germany was seen—initially along with France—as the center of European financial strength and the source of funding for the Eurozone’s debt-hobbled periphery. But France’s standing in that core weakened considerably this summer when bank stress tests revealed French banks to be the most exposed to toxic sovereign debt, and this week Moody’s spooked markets by warning France is in danger of losing its triple-A credit rating.
Germany’s poor auction results Wednesday may signal that the feared bond vigilantes no longer see Germany as invulnerable to contagion or as having the capacity to shoulder the funding burdens of the rest of the eurozone.