Investors pay to lend money to EU bailout fund

Investors accepted negative interest rates 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 1.997 billion euros ($2.516 billion) worth of three-month bills at a yield of minus 0.0454 percent. 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 6.041 billion euros worth of bonds, bringing the so-called cover ratio to 3.0. The EFSF, which was established with a total lending capacity of 440 billion euros, is to be replaced eventually by a permanent rescue fund called the European Stability Mechanism, with 500 billion euros of firepower. The ESM was to come into force on July 1, but it has suffered delays, notably owing to legal challenges in Germany.