Germany’s two-year note yields was negative for a fourth day before the European Central Bank decides on interest rates and Spain sells as much as 4.5 billion euros ($5.75 billion) of securities.
Benchmark 10-year yields were about two basis points from lowest in nine weeks after German exports fell more than economists forecast in September. ECB President Mario Draghi and his colleagues will keep the refinancing rate at a record-low 0.75 percent, according to all but one of 63 economists in a Bloomberg News survey. Greece’s coalition government yesterday approved new austerity measures needed to release the latest tranche of bailout funds.
“The market consensus is that the ECB will keep rates on hold, but I would not be surprised if they cut today,” said Charles Berry, a government bond trader at Landesbank Baden Wuerttemberg in Stuttgart. “Judging from recent comments from Draghi, I think he is preparing the market for lower rates. The impact of the crisis is hitting core countries like Germany. Core bond yields are likely to stay low.”
Germany’s two-year yield was at minus 0.032 percent at 9:08 a.m. London time after falling to minus 0.055 percent yesterday, the least since Aug. 13. The zero percent note due in September 2014 was at 100.055. A negative yield means investors who hold the security until it matures will receive less than they paid to buy it.
The 10-year bund yielded 1.38 percent after sliding to 1.36 percent yesterday, the lowest since Sept. 3.
Draghi will hold a press conference at 2:30 p.m. in Frankfurt to discuss the rate decision. Inflation risks are “very low” and the debt crisis is starting to hurt Germany, he said at a conference yesterday.
Spain is scheduled to sell debt maturing between 2015 and 2032 today. That will be the first auction of 20-year bonds since October 2010, when it sold 941 million euros of the securities at an average yield of 4.777 percent.
The yield on Spanish 10-year bonds was little changed at 5.69 percent, and that on its 20-year security was also little changed at 6.36 percent.
“The auction will go OK,” said Huw Worthington, a fixed-income strategist at Barclays Plc in London. “Spain is reacting to specific market demand with the longer-end sale and so it will be fine.”
Germany’s exports, adjusted for work days and seasonal changes, fell 2.5 percent from August, when they gained 2.3 percent, the Federal Statistics Office said. Economists surveyed by Bloomberg News forecast a decline of 1.5 percent.
German bonds returned 3.9 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spain’s bonds rose 2.8 percent, according to the gauges.