Germany’s longer-maturity bunds rose, snapping a three-day decline, as the nation cut its sovereign-bond sales for 2013 to the lowest in five years.
Thirty-year securities led gains, with yields dropping the most in three weeks, as the Federal Finance Agency said Germany plans to sell 250 billion euros ($331 billion) of bonds next year, from 255 billion euros in 2012. French government bonds advanced after the nation also reduced next year’s borrowing requirement. The debt of so-called core countries was underpinned by speculation U.S. leaders will struggle to reach an agreement on the so-called fiscal cliff.
“Bunds traded up a little on the release” of the German debt calendar, said Christoph Rieger, head of fixed-rate strategy at Commerzbank AG in Frankfurt. “Given the shortening of reduction in supply in the longer part of the curve, this has supported the market,” referring to securities with a maturity of more than 10 years.
German 30-year yields dropped four basis points, or 0.04 percentage point, to 2.28 percent at 4:24 p.m. London time. The 2.5 percent bund maturing in July 2044 rose 0.83, or 8.30 euros per 1,000-euro face amount, to 104.925. The rate declined as much as five basis points, the most since Dec. 5. The 10-year yield fell one basis point to 1.42 percent.
Germany plans to auction as much as 173 billion euros of bonds and 77 billion euros of bills in 2013, the Finance Agency said. It sold a record 334 billion euros of debt in 2009, up from 220 billion euros a year earlier.
The reduction in debt sales is “good for Germany and the wider market,” said Ciaran O’Hagan, head of European interest-rate strategy at Societe Generale SA in Paris. Selling fewer bonds in 2013 and focusing more on the five-year sector where the agency can expect to pay lower interest rates is also positive, O’Hagan said.
France cut its borrowings in 2013 to 169 billion euros as President Francois Hollande squeezes the budget deficit. The updated figure is 1 billion euros less than Paris-based Agence France Tresor’s Sept. 28 estimate. Yields on 10-year securities fell two basis points to 1.99 percent.
“This is a good sign that perhaps we have seen the worst in terms of fiscal stress in the region,” said Michael Leister, a fixed-income strategist at Commerzbank AG in London. “The reduction in issuance will be positive for the market and we hope the trend will continue. Weak growth is the biggest risk facing the region as it may derail fiscal reforms and push up borrowing needs again.”
The U.S. White House said yesterday that talks between President Barack Obama and Republican House Speaker John Boehner over ways to avoid the fiscal cliff of more than $600 billion in tax increases and spending cuts are regressing.
German producer prices slid 0.1 percent last month after stagnating in October, the Federal Statistics Office in Wiesbaden said today. An index of consumer confidence in the 17-nation currency bloc increased to minus 26.6 this month from minus 26.9 in November, the European Commission in Brussels said in an initial estimate today. Last month’s reading was the lowest since May 2009.
Volatility on Belgian debt was the highest among euro-area nations tracked by Bloomberg, followed by that of Austria and Ireland, according to measures of 10-year bonds, two- and 10-year yield spreads and credit-default swaps.
The yield on Belgium’s 10-year bond fell as much as six basis points to 2.04 percent, the lowest since Bloomberg began compiling the data from 1993.
German bunds returned 3.7 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Italian debt earned 21 percent and French bonds gained 10 percent.