Euro-Area Bond Yield Curves Steepen as France Sells 50-Year Debtby
France's 10- to 30-year yield spread widens to most in a month
German bonds set for longest stretch of declines this year
Euro-area government bonds with longer-dated maturities bore the brunt of a selloff in the region as investors absorbed new debt, including France’s sale of 50-year securities through banks.
The extra yield, or spread, that investors get for holding French 30-year bonds instead of 10-year securities jumped to the most in a month. Similar trends prevailed across the region with Germany’s 30-year bunds, which are set for their longest losing streak since December, yielding the most versus those due in 10 years since March 24. Dutch 30-year bond yields climbed to the highest in more than two weeks as the nation auctioned debt maturing in January 2047.
The deluge of supply is disturbing a rally that has seen longer-dated bonds outperform as investors seek higher yields further along the curve after the European Central Bank’s stimulus measures suppressed shorter-dated yields. While buyers of negative-yielding German two-year notes can expect to get back less than they paid if they hold them to maturity, the yield on 30-year bunds is more than 0.85 percent.
“The new supply continues to be the main driver” of market direction, said Jan Von Gerich, chief strategist at Nordea Bank AB in Helsinki. “We have seen a clear steepening in the euro curve and you haven’t seen it, at least to the same magnitude, in U.S. Treasuries. This very much suggests that it’s supply driven.”
France’s 30-year bond yield rose eight basis points, or 0.08 percentage point, to 1.49 percent as of 4:14 p.m. London time, having increased nine basis points in the previous two days. The 3.25 percent security due in May 2045 fell 2.355, or 23.55 euros per 1,000-euro ($1,139) face amount, to 141.275. The yield on the nation’s debt due in April 2060 climbed 10 basis points to 1.73 percent, the biggest increase since Dec. 29.
The spread between French 10- and 30-year bond yields expanded three basis points to 97 basis points Tuesday, and touched 98, the widest since March 11. The gap was 85 basis points as recently as April 5, the narrowest since June.
France was said to sell 3 billion euros of debt due in May 2066 and 6 billion euros of bonds maturing in May 2036 via banks, according to a person familiar with the matter.