Thread by @Brad_Setser

Stunning chart. German savers, foreign private investors and (to a degree) reserve managers have all been forced into riskier investments b/c of the shrinking supply of the euro area's safest asset.

(h/t @adam_tooze)

@adam_tooze German mini-stimulus under discussion is too small to change the basic dynamics in the bund market. Would mostly be a swing from a surplus to balance -- no big change in net bund supply

ft.com/content/da406f…

@adam_tooze Looks like reserve managers hold an estimated EUR 600b in bunds. That falls far short of the world's euro reserve holdings. The world's reserve managers really have no choice but to hold French (and now Spanish?) bonds -- or take the ECB's negative deposit rate

@adam_tooze In a world without Germany's debt brake, I would think that Germany - as the issuer of the euro area's reserve asset - should aim to keep bund supply stable as share of its GDP.

It would still be growing less rapidly that global demand for EUR reserves (in all probability)

@adam_tooze As I have said before, rather than complaining about German trade policy, the Trump administration really should be complaining about German fiscal policy.

Shrinking bund/ euro safe asset supply is effectively forcing global investors into the dollar ...