German Bonds Drop With Treasuries Before U.S. Debt Auction

Bond Markets Flash Back to 'Ukrainian Chicken Moment'
  • Ten-year bunds fall for fourth day, longest streak in 2 months
  • Yields climb to highest since Brexit referendum result

German 10-year bunds fell for a fourth day, following Treasuries lower before the U.S. auctions $12 billion of securities maturing in 30 years.

Benchmark bunds posted their longest losing streak in two months, with yields climbing to the highest since the Brexit vote in June. That’s a reversal from earlier in the day, when Federal Reserve Governor Lael Brainard’s dovish comments on Monday encouraged traders to pare bets on an imminent U.S. interest-rate increase, supporting bonds. She was the last policy maker to speak before the Fed’s Sept. 20-21 meeting.

“Now that the blackout period has started, we won’t be hearing any constructive Fed comments until the middle of next week,” said Christian Lenk, a fixed-income strategist at DZ Bank AG in Frankfurt. “So the market is focusing on other aspects. With the broader-based selloff that we saw in the ultra-long end of the curves in the past week, maybe traders are worried this upcoming auction in the U.S. might exert further pressure in the long-end.”

Germany’s 10-year bund yield rose three basis points, or 0.03 percentage point to 0.07 percent as of the 5 p.m. London-time close, the highest since June 24. The zero percent security due in August 2026 fell 0.337, or 3.37 euros per 1,000-euro ($1,125) face amount, to 99.296.

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