German Bonds Fall With Higher-Rated Peers as Oil Pares Selloff

  • Austrian, French securities also decline, paring Monday's gain
  • Italian bonds underperform Spain's before debt sales

Government bonds from the euro area’s higher-rated nations declined as oil prices stabilized following a selloff Monday.

Securities from Germany to Austria pared an advance from a day earlier, when a more than 3 percent drop in oil damped the outlook for inflation and boosted fixed-income assets. Crude futures rose Tuesday as investors weighed forecasts for falling U.S. stockpiles against Saudi Arabia’s prediction of lower oil revenues.

Italian securities underperformed Spain’s with the Rome-based Treasury selling as much as 7.5 billion euros ($8.2 billion) of bonds Tuesday and Wednesday.

“It is a reversal of yesterday’s action on low volumes,” said David Schnautz, a rates strategist at Commerzbank AG in London. “Today and especially tomorrow, Italy will wrap up 2015 euro-area sovereign bond supply, and this may also weigh a bit on the overall market due to the thin liquidity situation.”

Benchmark German 10-year bund yields rose six basis points, or 0.06 percentage point, to 0.62 percent as of 4:05 p.m. London time. The 1 percent security due in August 2025 fell 0.59, or 5.90 euros per 1,000-euro face amount, to 103.485. On Monday, the yield declined seven basis points from the Dec. 23 close.

Low Volumes

Trading volumes on 10-year bund futures totaled about 174,000 contracts on Monday. That’s the lowest in 2015 and compares to this year’s average of about 633,000.

Italian 10-year bond yields rose two basis points to 1.63 percent, while those on similar-maturity Spanish debt increased less than one basis point to 1.80 percent. The yield on French 10-year securities climbed eight basis points to 1 percent.

Italy allotted 1.5 billion euros of zero-coupon bonds due in August 2017 at an average yield of minus 0.109 percent Tuesday.

The Treasury in Rome plans to sell as much as 4.5 billion euros of five- and 10-year securities on Wednesday, and up to 1.5 billion euros of seven-year floating-rate notes.

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