German Bonds Fall as U.K. Political Clarity Reduces Haven Demand

Updated on
  • Ten-year yields climb to the highest in more than a week
  • Prospect of more global monetary stimulus also helping markets

German government bonds fell for a second day as greater political clarity in the U.K. and the prospect of a boost to monetary stimulus globally supported stocks and reduced demand for the safest assets.

Yields on the nation’s 10-year bunds, the euro zone’s benchmark government securities, climbed to the highest in a more than a week -- days after touching a record low. British Home Secretary Theresa May’s imminent accession as prime minister eased the political stresses felt in the country since the June 23 Brexit vote.

Speculation is meanwhile growing that, not only the Bank of England but also Japan and the European Central Bank, are preparing fresh injections of stimulus to stoke their economies.

“It’s a combination of factors that’s keeping the market comforted right now,” said Orlando Green, a rates strategist at Credit Agricole SA’s corporate and investment-banking unit in London. “You have a bit more certainty on the U.K. political front,” plus “the market suspects that policy makers are on-side to try and shore up confidence.”

Germany’s 10-year bund yield rose seven basis points, or 0.07 percentage point, to minus 0.10 percent as of 4:35 p.m. London time. It touched minus 0.09 percent, the highest since July 1 -- up from a record low of minus 0.205 percent set on July 6.

The 0.5 percent security due in February 2026 fell 0.71, or 7.10 euros per 1,000-euro ($1,107) face amount, to 105.755. 

Yields on similar-maturity French bonds climbed seven basis points to 0.19 percent, while Spain’s rose two basis points to 1.17 percent and Italy’s added two basis points to 1.23 percent.

“There’s still a relatively positive outlook compared to last week, which was very much the reverse,” Green said.

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