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German Note Yield Falls to Record Before Italian Bill Auction

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Dec. 28 (Bloomberg) -- German government bonds rose, with the two-year note yield falling to a record, as Italy prepared to auction as much as 11.5 billion euros ($15 billion) of debt.

One-year German yields were negative for a second day as Asian stocks declined, boosting the allure of fixed-income assets. Greece will hold national elections at the end of April, state-run Athens News Agency reported, citing Finance Minister Evangelos Venizelos. Italy plans to sell 9 billion euros of 179-day bills today and as much as 2.5 billion euros of zero-coupon notes due in 2013. The nation is scheduled to auction bonds maturing between 2014 and 2022 tomorrow.

The yield on two-year German notes dropped one basis point to 0.16 percent at 7:26 a.m. London time, after falling as low as 0.142 percent, the least since Bloomberg began collecting the data in 1990. The 0.25 percent security due December 2013 rose 0.02, or 20 euro cents per 1,000-euro face amount, to 100.18.

One-year rates were at minus 0.03 percent.

German government bonds have rallied this year as Europe’s debt crisis threatened to spread to the region’s larger economies, stoking demand for the safest investments. German debt has returned 9.3 percent, the most since 2008, according to indexes compiled by the European Federation of Financial Analysts Societies and Bloomberg. Italian debt lost 6.1 percent, and Greek securities dropped 63 percent, the indexes show.

The new date for Greek parliamentary elections provides the government of Prime Minister Lucas Papademos with more time to complete a new financing agreement and a debt swap, the Athens News Agency reported.

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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