German Bund Yield Is 2 Basis Points From 3-Week Low Before ECB

German government bonds were little changed before European Central Bank policy makers announce the result of their monthly interest-rate-setting meeting.

Ten-year bund yields were within two basis points of an almost three-week low after a report confirmed the euro area slipped into a recession in the third quarter. The ECB will keep its main refinancing rate at an all-time low of 0.75 percent, according to the median estimate of analysts in a Bloomberg survey. French 10-year yields fell to a record as the nation sold 4 billion euros ($5.2 billion) of securities due between 2018 and 2027.

“From the ECB, we’ll hardly get anything,” said Norbert Aul, a rates strategist at Royal Bank of Canada in London. “We need to have a sustained improvement in the credit perception of peripheral markets before we see a sizable shift from bunds,” he said, referring to region’s most-indebted countries.

The German 10-year yield was at 1.35 percent at 10:02 a.m. London time. The rate dropped to 1.33 percent yesterday, the least since Nov. 19. The price of the 1.5 percent bond due September 2022 was at 101.33. Two-year notes yielded 0.005 percent.

The central bank will announce the rate decision at 1:45 p.m. in Frankfurt before ECB President Mario Draghi holds a press conference 45 minutes later. He will unveil the latest economic forecasts, including a first projection for 2014.

French Auction

Gross domestic product in the 17-nation single-currency bloc slipped 0.1 percent from the second quarter, in line with the median forecast of 40 economists and an initial estimate, leaving the region back in a recession three years after emerging from the last one.

France sold 15-year bonds at an average yield of 2.56 percent, an all-time low. It last sold the securities on Sept. 6 at 2.85 percent, according to data compiled by Bloomberg.

The yield on French 10-year bonds was one basis point higher at 2.01 percent, after falling to 1.989 percent, the least on record. Austrian 10-year rates dropped to 1.727 percent, also a record, before settling at 1.75 percent. The yield on Switzerland’s 10-year bonds dropped to a low of 0.393 percent.

A report today will show German factory orders, adjusted for seasonal swings and inflation, rose 1 percent in October, after slumping 3.3 percent in September, the most in a year, according to the median estimate in another Bloomberg survey.

German bonds returned 4 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish debt gained 4.9 percent and France’s earned 9.6 percent.

To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net; Lukanyo Mnyanda in London at lmnyanda@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net.

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