German government bonds snapped their biggest advance in almost two weeks amid speculation an auction of 30-year securities will add to evidence demand for fixed-income assets is waning as the economy improves.
Benchmark 10-year bunds dropped earlier as an industry report showed German consumer sentiment is poised to improve to a seven-year high in March. The nation is scheduled to sell 3 billion euros ($4.12 billion) of bonds maturing in August 2046, a week after an offering of securities due in a decade failed to attract enough bids to reach the maximum target. Italian 10-year bonds were little changed after Prime Minister Matteo Renzi won his first confidence vote yesterday.
“I haven’t met a lot of investors who are tripping over themselves to buy German bunds,” said Peter Schaffrik, head of European rates strategy at Royal Bank of Canada in London. “The 30-year is always a difficult sell. Yields are low.”
Germany’s 10-year yield was little changed at 1.65 percent at 8:52 a.m. London time after climbing to 1.66 percent. The price of the 1.75 percent bund due in February 2024 was 100.92. The yield dropped three basis points, or 0.03 percentage point, yesterday, the biggest decline since Feb. 13.
Germany’s consumer confidence index will rise to 8.5 in March from a revised 8.3 this month, Nuremberg-based GfK AG said. That’s the highest reading since January 2007.
Yields on the 2.5 percent bond due in July 2044 was little changed at 2.52 percent. The nation last sold 30-year debt on Oct. 23 at an average yield of 2.64 percent, compared with 2.47 percent at an auction on July 31.
“We do not particularly like this bond and we do not expect demand to be particularly strong,” UniCredit SpA analysts including Luca Cazzulani in Milan, wrote in a note to clients. “The result of last week’s 10-year auction, which was technically uncovered, suggests demand is not very strong at these levels. And it has been a regular occurrence for the new 30-year auction to go uncovered in the last few years.”
German securities returned 2 percent this year through yesterday, trailing behind the 3.9 percent gain from their Spanish counterparts, Bloomberg World Bond Indexes show. Italian bonds rose 3.3 percent.