Dutch Bonds Drop With Germany’s as Draghi Damps Stimulus Bets

Dutch 10-year bonds dropped for a fifth day after European Central Bank President Mario Draghi used a speech to stress the need for structural change in the euro area, damping bets on sovereign-debt purchases.

Yields on the Dutch securities rose to the highest in a month as Draghi’s comments yesterday came after ECB Vice President Vitor Constancio had said there was no proposal for quantitative easing at the central bank’s September meeting. German and Finnish securities also fell amid speculation improving U.S. economic data will prompt the Federal Reserve’s Open Market Committee to signal a move toward raising interest rates at its meeting next week. Greece issued 1.62 billion euros ($2.1 billion) in new bonds after a Treasury bill exchange.

“This is the message Draghi also made very clear at the last meeting,” said Michael Leister, a senior fixed-income strategist at Commerzbank AG in Frankfurt. “The FOMC is really moving into focus. Some concern that the Fed will surprise on the hawkish side next week is really the driver for this ongoing correction higher in core yields.”

Dutch 10-year yields rose five basis points, or 0.05 percentage point, to 1.25 percent at 4:17 p.m. London time, the highest since Aug. 13. The 2 percent bond due in July 2024 fell 0.445, or 4.45 euros per 1,000-euro face amount, to 106.935. The rate climbed 17 basis points this week, the most since the period ended Aug. 16, 2013.

Benchmark German 10-year yields added five basis points today to 1.09 percent and Finland’s 10-year yield also increased five basis points, to 1.21 percent.

ECB Policy

Investment in the euro area’s economy will only return to pre-crisis levels if governments work with the central bank to achieve reforms and stimulate growth, Draghi said in Milan yesterday. The ECB last week cut interest rates and announced it will buy asset-backed securities and covered bonds.

“There was no proposal for doing QE at this meeting,” Constancio said in an interview with Boersen-Zeitung. “QE was discussed, but it was not on the table for a decision.”

Sovereign bonds worldwide are headed for their biggest two-week loss in 14 months on concern the Fed is moving closer to raising interest rates. Researchers at the Fed Bank of San Francisco wrote in a report this week that “the public seems to expect a more accommodative policy than Federal Open Market Committee participants.”

Greek Exchange

Greece will exchange treasury bills for 1.03 billion euros of 2019 notes and 589 million euros of 2017 notes, the finance ministry said in an Athens bourse filing today.

Irish 10-year bonds declined for a fourth day as Prime Minster Enda Kenny said he’s “hopeful” that the nation will receive approval from other European Union states to repay most of its International Monetary Fund loans early to save the nation 1.5 billion euros over five years. The euro group agreed in principle to the plan.

Volatility on Irish bonds was the highest in the euro area today, followed by those of Austria and Germany, according to measures of 10-year debt, the yield spread between two- and 10-year securities and credit-default swaps.

Ireland’s 10-year yield rose seven basis points to 1.86 percent, after falling to a record-low 1.594 percent on Sept. 8.

Euro-area government securities returned 9.5 percent this year through yesterday, Bloomberg World Bond Indexes show. Germany’s earned 6.7 percent and the Netherlands’ 7.6 percent.

(A previous version of this story was corrected to amend the date of ECB monthly meeting in second paragraph.)

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