European Bonds `Tread Water' as Traders Wait for ECB's Draghi

  • Bunds end 2-day decline as nation sells 10-year securities
  • Economists forecast no change to ECB's rates policy Thursday

Germany’s government bonds halted a two-day drop as traders awaited the European Central Bank’s next policy decision and more details about previously announced stimulus measures.

The country’s 10-year bunds climbed after it sold 3.2 billion euros ($3.6 billion) of the securities to investors. The bonds were bought with an average yield of 0.15 percent, the lowest since April 2015.

While economists aren’t forecasting any change to ECB interest rates this week, a separate survey showed 60 percent of analysts predict more stimulus may come as soon as September. Last month ECB President Mario Draghi eased monetary policy further by cutting rates and adding corporate bonds to the asset-purchase program.

“We will still probably see markets somewhat quiet until we get Draghi’s comments out of the way, particularly any information on how the corporate-bond purchases program might work and any further thoughts on ‘helicopter money’ and negative rates,” said Owen Callan, a Dublin-based fixed-income strategist at Cantor Fitzgerald LP. In markets there’s “general risk aversion and treading water until tomorrow.”

Germany’s 10-year bund yield dropped two basis points, or 0.02 percentage point, to 0.15 percent as of the 5 p.m. close in London, after climbing four basis points in the previous two days. The 0.5 percent security due in February 2026 rose 0.155, or 1.55 euros per 1,000-euro ($1,134) face amount, to 103.375.

France’s 10-year bond yield fell two basis points to 0.49 percent, while that of similar-maturity Portuguese debt rose two basis points to 3.14 percent. Spain’s 10-year bond yield was little changed at 1.53 percent.

Germany’s sovereign bonds have returned 3.7 percent this year, the second-best performer in the euro zone after Belgium’s government debt, which has earned 4.2 percent, according to Bloomberg World Bond Indexes.

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