Germany got bids for 6.24 billion euros ($7.78 billion) of two-year notes at an auction today, exceeding its 5 billion-euro maximum sales target, according to a statement from the Bundesbank.
The nation sold the securities due in September 2014 at an average yield of zero percent, compared with minus 0.06 percent at an auction of similar-dated debt on July 18. German bonds had declined on the previous two days, pushing two-year yields above zero for the first time in five weeks, amid speculation European leaders are making progress in solving the region’s debt crisis.
“You could argue on a very cheeky scale that this may even be a bargain to catch it at zero,” said David Schnautz, a fixed-income strategist at Commerzbank AG in New York. “There are a lot of hopes, but there’s also a lot of disappointment potential. For all those who still seek a very safe parking lot for their money, buying the two-year German paper at nothing is actually still a valid trade.”
The yield on the previously issued German note due in June 2014 fell one basis point, or 0.01 percentage point, to minus 0.006 percent at 5 p.m. London time. The yield climbed as high as 0.02 percent yesterday after being negative since July 12.
A negative yield means investors who hold the security until it matures will receive less than they paid to buy it.