The chief executive of Germany's Munich Re (MUV2.XE), the world's biggest reinsurer by premium revenues, doesn't have concerns over possible penalty rates by the European Central Bank, saying that the short-term rates already deliver negative real interest rates, according to a preview of an interview to be published in Tagesspiegel on Monday.
"As such, it doesn't make so much a difference whether a bank when it places money with the ECB, receives no interest [payment] or if it has to pay a little," Nikolaus von Bomhard is quoted as saying. "It's clear, who saves today and doesn't go into very long-term interest rate products, loses," he says.
At its November meeting the ECB surprised many market participants by cutting its main refinancing rate by 25 basis points to a record low 0.25%. It aimed to calm fears over falling inflation and decreasing excess banking sector reserves.
ECB executives have said the central bank's potential arsenal includes asset purchases or further rate cuts, possibly pushing the deposit rate into negative territory, or launching a further long-term refinancing operation.
German two-year government bond yields currently hover around 0.10%, while five-year yields trade around 0.65%, trading way below inflation levels. The annual consumer inflation rate in Germany was 1.3% in November, up from 1.2% in October, while in European Union harmonized terms the annual reading rose to 1.6% in November from 1.2% in October.
The ECB aims to keep inflation in the euro zone close but below 2% over the medium term.
Despite new record levels on stock markets and price increases in real estate markets, as consequence of low interest rates, there's no danger of a speculative bubble, according to Mr. von Bomhard.
"I can't currently see that the DAX is overall overvalued," he is quoted as saying. In his view, the German real estate market isn't that volatile as in other countries.
"Therefore, I don't think that the German real estate market eventually crashes through the floor," Mr. von Bomhard said in the interview.
Newspaper website: www.tagesspiegel.de
Write to the Frankfurt Bureau at email@example.com
(END) Dow Jones Newswires
December 01, 2013 08:55 ET (13:55 GMT)Copyright (c) 2013 Dow Jones & Company, Inc.
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