Thursday's Top 10 with NZ Mint: Bond investors flee Southern Europe to invest in 0% interest German bunds; Germany as vays of making Greece stay in zee euro; Chinese coal imports collapse; Dilbert

Here's my Top 10 links from around the Internet at 10 am (!)  in association with NZ Mint.

I welcome your additions in the comments below or via email tobernard.hickey@interest.co.nz.

I'll pop the extras into the comment stream. See all previous Top 10s here.

My must read today is #9. It made me think about the nature of markets and morals.

1. All about fear   - FT reports Germany was able to issue a zero coupon two year bond last night.

This is a not-so-silent run in Europe's capital markets.

Investors are pulling their money out of Southern European bond markets, fearing the contagion from any 'Grexit'.

They are desperate to put their money where it is safe from a euro breakup and devaluation into another dodgy currency.

Investors can be sure that if the euro breaks up then the Deutsche mark would be revalued up.

So that's where you'd make your money -- a revaluation of the currency of the bond. Not from the interest, because there is no interest.

Here's the thinking:

The scale of this “flight to quality” was encapsulated on Wednesday by the sale of Germany’s first zero-coupon two-year bond, which investors snapped up at a sliver of a discount, to give it a record low yield of just 7 basis points. In other words, Berlin is paying next to nothing to issue debt. Thirty-year bond yields fell below 2 per cent for the first time.

“It’s pretty amazing,” says Nathaniel Timbrell-Whittle, co-head of European sovereign debt capital markets at BNP Paribas. “Germany is still clearly the safe haven of choice in Europe.”

2. Germany rules out common bonds - This is the real problem for Europe (apart from the euro itself).

Germany doesn't want to guarantee Southern Europe's debt.

Funny that. Except for the global economy. Which is not laughing.

Here's the FT:

“There is no way of introducing them under the current [EU] treaties. Indeed, there is an explicit ban on them,” one senior German official said, adding Berlin would not drop its opposition in the foreseeable future. “That’s a firm conviction which will not change in June.”

3. Vee haf vays of making you stay in zee euro - Here's Ambrose Evans Pritchard at The Telegraph talking about the latest German tactics to bully Greece into staying in the euro.

What are these people thinking?

Do they want to blow up the financial world?

The German financial daily Handelsblatt said the Bundesbank was "holding a gun to Greece's head", hammering home the message that Germany will not submit to blackmail from populist politicians in Athens.

Berlin also leaked news that their member on the European Central Bank board, Jürg Asmussen, is to head an ECB taskforce to handle the Greek crisis.

There was confusion in Brussels over leaks that EMU finance ministry officials had agreed in a meeting on Monday – allegedly in the name of Eurogroup executives – that each state should draw up a national plan to cope with a Greek exit.

4.  China to fast track approvals for infrastructure - China's government seems to be grinding the gearbox to get the economy going again. The gearshift may not be as smooth as last time though.

Here's Reuters:

China will fast track approvals for infrastructure investment to combat a slowdown in the economy, a state-backed newspaper reported on Tuesday, showing how Premier Wen Jiabao's call for policies to support growth is being put into action.

The pace of investment in the likes of roads, bridges and real estate is running at its weakest in nearly a decade, April data showed, suggesting the world's second-biggest economy is heading for a sixth straight quarter of slowing growth.

5. Iron Ore and coal deferrals - China has a lot of work to do to get things going again. 

Here's more from the FT on coal importers deferring and defaulting on orders.

Miswin Mahesh, coal analyst at Barclays in London, said that the “rate of supply growth across the Atlantic and Pacific basins continues to outpace the appetite for coal”. US coal miners had boosted their exports after domestic demand plunged due to strong competition in the utilities sector from cheap natural gas on the back of the shale revolution. The share of electricity generated by burning coal in the US has fallen to a near 35-year low, according to the US Department of Energy.

The drop in iron ore, the main commodity used in steelmaking, and thermal coal prices, used to fire power stations, will hurt blue-chip miners including BHP Billiton, Vale of Brazil, Rio Tinto, Xstrata and Anglo American.

6. De euroisation chart - FTAlphaville points here to a flood of funds out of Italy.

The de-euroisation continues and is, in Italy at least, getting faster… these charts show foreigners running away from Italian liabilities in March at their fastest pace ever, and illustrate just how quickly the LTRO sheen has faded.

Italy’s March balance of payments, out on Monday, showed its biggest ever decline in portfolio liabilities and while Italian repatriation flows show no consistent sign of slowing they are not keeping up with the foreign pull-out from Italian portfolio instruments.

7. Panorama and Luxembourg - The BBC's Panorama documentary team have done a piece on how Luxembourg is used to avoid paying an awful lot of tax in many real countries.

Secret documents obtained by the programme reveal how major UK-based firms cut secret tax deals with authorities in Luxembourg to avoid paying corporation tax in Britain.

The confidential tax agreements, that Panorama has looked at, were all devised by big four accountancy firm, PriceWaterhouseCoopers.

The companies involved include pharmaceutical giant GlaxoSmithKline (GSK) and media company Northern and Shell, owned by Richard Desmond.

In the case of GSK, the UK-headquartered firm set up a new company in the tiny European tax haven of Luxembourg in 2009.

In 2010, the subsidiary lent £6.34bn to a GSK company in the UK. In return, the UK company paid nearly £124m in interest back to the Luxembourg subsidiary - effectively removing that money from the UK company's taxable profits – so it was no longer available to tax in the UK at 28%.

8. A bubble made of Chinese cement - Those worried about a hard landing in China will not like the look of this chart highlighted by Zerohedge.

9. How markets crowd out morals - Here's Michael J Mandel at Boston.net with a fascinating musing on the idea of using markets to change all sorts of social behaviour.

This economistic view of virtue fuels the faith in markets and propels their reach into places they don’t belong. But the metaphor is misleading. Altruism, generosity, solidarity, and civic spirit are not like commodities that are depleted with use. They are more like muscles that grow stronger with exercise. One of the defects of a market-driven society is that it lets these virtues languish. To renew our public life we need to exercise them more strenuously.

10. Totally Jon Stewart on Greece - This is from last year, but is still funny and interesting.