German Yields Reach 5-Month Low on Haven Bid as Greek Bonds DropNeal Armstrong and Eshe Nelson
Germany’s 10- and 30-year government bond yields fell to the lowest levels since August as concern growth in emerging markets is slowing boosted demand for the safest fixed-income assets.
Benchmark 10-year bunds rose for a fourth week, the longest winning streak since April. Greek and Slovenian securities tumbled as stocks around the world slumped on signs of weakness in emerging-market economies. Spanish and Italian 10-year bonds dropped for a fourth day as demand for higher-yielding assets waned and French debt underperformed benchmark German bunds.
“It looks like a shift toward risk aversion so bunds are rising,” said Rainer Guntermann, a fixed-income strategist at Commerzbank AG in Frankfurt. “There’s been some adverse news coming from emerging markets and investors are also mulling the implications of Fed tapering.”
Germany’s 10-year yield fell five basis points, or 0.05 percentage point, to 1.66 percent at the 5 p.m. London close, after dropping to 1.64 percent, the lowest since Aug. 5. The rate dropped 10 basis points this week. The 2 percent bond maturing August 2023 rose 0.45, or 4.50 euros per 1,000-euro ($1,368) face amount, to 102.99.
The nation’s 30-year yield fell as much as six basis points to 2.55 percent, the lowest since Aug. 13, while the two-year rate slid to 0.11 percent, the least since Nov. 22.
The MSCI All-Country World Index fell 1.5 percent, taking this week’s drop to 1.9 percent, as signs of weakness in China’s economy added to concern that cuts to the U.S. Federal Reserve’s stimulus program risk roiling financial markets.
Greece’s 10-year yield jumped 24 basis points to 8.45 percent, rising for a seventh successive day. European Union Economic and Monetary Affairs Commissioner Olli Rehn said Greece needs to do its homework and won’t get any more bailout money until its next review is complete, the Wall Street Journal reported.
The yield on Slovenia’s 4.625 percent bonds due in September 2024 climbed 25 basis points to 4.88 percent.
Volatility on French bonds was the highest in the euro-area markets today, followed by those of Austria and Italy, according to measures of 10-year debt, the yield spread between two- and 10-year securities and credit-default swaps.
France’s 10-year yield fell five basis points to 2.38. The yield difference between French 10-year bonds and benchmark German bunds was little changed at 72 basis points after widening to 75 basis points, the most since April 2. The French security is due in May 2024 and the German in August 2023.
LCH Clearnet Ltd., Europe’s biggest clearing house, increased the extra deposit it demands from clients to trade some French government bonds, it said today in a statement on its website. The margin for trading some Italian and Spanish securities will decline, the statement said.
Spanish 10-year yields added four basis points to 3.80 percent after jumping as much as seven basis points. Italy’s climbed five basis points to 3.91 percent and the rate on similar-maturity Portuguese debt increased 12 basis points to 5.28 percent.
Fitch Ratings affirmed Germany’s credit rating today at AAA with a stable outlook, citing a decline in the debt level of Europe’s biggest economy. Moody’s Investors Service is scheduled to update its outlook for France and Slovenia today.
Dutch 10-year yields declined as much as six basis points to 1.98 percent, a level not seen since July 24, while those of Austria dropped six basis points to 2.02 percent, reaching the least since Aug. 1.
German bonds returned 1.1 percent this year through yesterday, Bloomberg World Bond Indexes show. Spain’s earned 2.4 percent and Italy’s rose 1.5 percent.