Investors Pay to Lend Money to EFSF Bailout Fund

Investors accepted negative interest rates again to lend money to the EU's bailout fund on Tuesday, according to the German central bank, which managed the issue.

The Bundesbank said in a statement that the European Financial Stability Facility placed 1.941 billion ($2.5 billion) euros' worth of six-month bills at a yield of minus 0.0181 percent, compared with minus 0.0179 percent at the previous auction in August.

A negative yield means that investors actually pay the EFSF to lend it money.

Demand for the issue was strong, with investors bidding for a total 5.476 billion euros worth of bonds, bringing the so-called cover ratio to 2.8.

The EFSF, which was established with a total lending capacity of 440 billion euros, is due to be replaced eventually by a permanent rescue fund called the European Stability Mechanism, with 500 billion euros of firepower.

The ESM was due to come into force on July 1, but was delayed due to legal challenges in Germany. Nevertheless, Germany's Constitutional Court finally gave its green light last week.

Jean-Claude Juncker, the head of the eurogroup of eurozone finance ministers, said at the weekend that the ESM would be up and running by late October.