German Bonds Advance on Increasing Appetite for Euro Area's Safest Assets
German 10-year bunds advanced as investors, concerned that some so-called peripheral nations such as Ireland will have to restructure their debt, sought refuge in the euro-region’s safest assets.
Irish 10-year bonds tumbled yesterday, with the yield soaring 67 basis points, driving the premium investors demand to hold the debt instead of German bunds to a record. The Portuguese-German spread also widened to an all-time high. LCH Clearnet Ltd. demanded its clients place a larger deposit when trading Irish securities. French Finance Minister Christine Lagarde said yesterday investors must share the cost of restructuring sovereign debt. Irish and Greek bonds rose today.
“Bunds are higher on safe-haven flows,” said Steven Major, global head of fixed-income research at HSBC Holdings Plc in London. “Lagarde’s comments mentioned restructuring and that’s another nail in the coffin. There’s still a big constituency of investors and traders who have not recognized until now that restructuring could happen.”
The yield on the 10-year bund, Europe’s benchmark government security, dropped four basis points to 2.41 percent at 7:47 a.m. in London. The 2.25 percent security maturing in September 2020 rose 0.38, or 3.8 euros per 1,000-euro ($1,379) face amount, to 98.64. The two-year yield fell three basis points to 0.95 percent.
German bonds have returned 8.5 percent this year, the same as U.S. Treasuries, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Greek debt lost 18.7 percent, Portuguese bonds lost 10.6 percent, while Irish securities declined 14.3 percent, the indexes show.
To contact the reporter on this story: Keith Jenkins in London at Kjenkins3@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
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