German Bonds Rise as Factory-Orders Plunge Highlights ECB TaskDavid Goodman
Germany’s government bonds advanced as a report showing factory orders plunged the most since 2009 prompted concern that Europe’s largest economy is slowing.
German 10-year yields approached the lowest level in a month as the data underlined the challenge European Central Bank President Mario Draghi faces in reviving growth. The ECB last week kept interest rates at record lows while failing to provide details on the size of purchases of asset-backed securities and covered bonds Draghi pledged in the latest round of stimulus. Greek bonds fell as the nation said it plans to sell seven- and 10-year debt in 2015.
“The central bank should be increasingly worried that it cannot count on even modest growth to keep inflation stable,” said Jan von Gerich, a fixed-income analyst at Nordea Bank AB in Helsinki. “It’s clear the weakness is touching Germany as well. These numbers suggest that worse is to come.”
German 10-year yields declined two basis points, or 0.02 percentage point, to 0.91 percent at 4:12 p.m. London time and touched 0.90 percent. The rate fell to 0.896 percent on Oct. 1, the least since Sept. 2. The 1 percent bund due in August 2024 rose 0.165, or 1.65 euros per 1,000-euro ($1,257) face amount, to 100.865.
The yield will be below 1 percent at year-end, Nordea’s von Gerich said.
German factory orders, adjusted for seasonal swings and inflation, fell 5.7 percent in August, after climbing a revised 4.9 percent in July, the Economy Ministry in Berlin said today. Analysts predicted a 2.5 percent decline, according to the median estimate in a Bloomberg News survey.
The five-year, five-year forward inflation swap rate, a gauge of price-growth expectations in the euro area, dropped one basis point to 1.89 percent today. That’s the lowest level since Bloomberg began collecting the data in 2004 according to closing-price data.
Italian 10-year yields added three basis points to 2.33 percent and the rate on similar-maturity Spanish debt rose four basis points to 2.15 percent.
Greece said it plans to improve its yield curve with sales of seven- and 10-year government debt, according to the 2015 draft budget presented today by Alternate Finance Minister Christos Staikouras.
Greek 10-year yields increased nine basis points to 6.44 percent and the 30-year rate climbed seven basis points to 7.06 percent.
German government securities returned 7.5 percent this year through Oct. 3, Bloomberg World Bond Indexes show. Spain’s earned 14 percent and Italy’s 13 percent.