German 10-year government bonds rose for a fifth week, the longest run since the height of the euro-region’s debt crisis, as geopolitical tensions prompted a surge in demand for the safest fixed-income securities.
Germany’s 10-year yields dropped to a record and two-year rates fell below zero for the first time since May 2013 as European Central Bank President Mario Draghi said risks to growth from conflicts are increasing.
The ECB left its key interest rates at record lows as it seeks to stimulate growth and avert deflation in the euro area with a package of measures announced in June. Yields on bonds from France to Finland fell to records amid a flight to safety.
“Geopolitical tensions have been a driver of lower bond yields,” said Jan Von Gerich, a fixed-income strategist at Nordea Bank AB in Helsinki.
“We’ve also seen more signs that the euro-zone economy is seeing weaker development going forward.
No inflation and weaker activity data adds to expectations of a broad-based ECB asset-purchase program. In the near term, bond yields can go lower still.”
Benchmark German 10-year (GDBR10) yields fell eight basis points, or 0.08 percentage point, this week to 1.05 percent at 5 p.m. London time yesterday.
The 1.5 percent bund due in May 2024 rose 0.725, or 7.25 euros per 1,000-euro ($1,341) face amount, to 104.12. The rate dropped to 1.023 percent yesterday, the least since Bloomberg began tracking the data in 1989.
Longest Streak
The five-week decline in yields is the longest since the period ended June 1, 2012, before Draghi pledged the next month to do “whatever it takes” to safeguard the euro.
Two-year notes yielded 0.009 percent after the rate slipped to minus 0.005 percent yesterday, matching the least since May 23, 2013. A negative yield means investors who hold a security until it matures will receive less than they paid to buy it.
President Barack Obama approved limited air strikes against Sunni militants in Iraq and said that they would be used to protect U.S. personnel and Yezidis, a minority sect concentrated in northern Iraq, who have been targeted by insurgents.
A three-day truce ended and Israel renewed air strikes on Gaza, while the European Union increased sanctions on Russia, prompting a slump in higher-yielding assets and a flight to the relative safety of government bonds.
France’s (GFRN10) 10-year yield dropped to as low as 1.441 percent yesterday and the rate on equivalent Finnish debt fell to 1.178 percent, both the least on record.
ECB Policy
The ECB left its main refinancing rate at a record-low 0.15 percent and the deposit rate at minus 0.1 percent on Aug. 7. Draghi said at a press conference in Frankfurt that day the rates will stay at present levels for an “extended period.”
A report due Aug. 14 will show euro-area growth slowed in the three months through June, according to the median estimate of economists in a Bloomberg News survey.
Data this week showed Italy returned to recession in the second quarter and German factory orders slumped the most since 2011 in June. Italy’s 10-year yield increased six basis points this week to 2.82 percent.
The rate on similar-maturity Spanish (GSPG10YR) bonds was little changed at 2.56 percent. German securities earned 6.2 percent this year through Aug. 7, Bloomberg World Bond Indexes show. Spain’s earned 10 percent, Italy’s 9.3 percent and Treasuries returned 3.9 percent.
bloomberg.com
Germany’s 10-year yields dropped to a record and two-year rates fell below zero for the first time since May 2013 as European Central Bank President Mario Draghi said risks to growth from conflicts are increasing.
The ECB left its key interest rates at record lows as it seeks to stimulate growth and avert deflation in the euro area with a package of measures announced in June. Yields on bonds from France to Finland fell to records amid a flight to safety.
“Geopolitical tensions have been a driver of lower bond yields,” said Jan Von Gerich, a fixed-income strategist at Nordea Bank AB in Helsinki.
“We’ve also seen more signs that the euro-zone economy is seeing weaker development going forward.
No inflation and weaker activity data adds to expectations of a broad-based ECB asset-purchase program. In the near term, bond yields can go lower still.”
Benchmark German 10-year (GDBR10) yields fell eight basis points, or 0.08 percentage point, this week to 1.05 percent at 5 p.m. London time yesterday.
The 1.5 percent bund due in May 2024 rose 0.725, or 7.25 euros per 1,000-euro ($1,341) face amount, to 104.12. The rate dropped to 1.023 percent yesterday, the least since Bloomberg began tracking the data in 1989.
Longest Streak
The five-week decline in yields is the longest since the period ended June 1, 2012, before Draghi pledged the next month to do “whatever it takes” to safeguard the euro.
Two-year notes yielded 0.009 percent after the rate slipped to minus 0.005 percent yesterday, matching the least since May 23, 2013. A negative yield means investors who hold a security until it matures will receive less than they paid to buy it.
President Barack Obama approved limited air strikes against Sunni militants in Iraq and said that they would be used to protect U.S. personnel and Yezidis, a minority sect concentrated in northern Iraq, who have been targeted by insurgents.
A three-day truce ended and Israel renewed air strikes on Gaza, while the European Union increased sanctions on Russia, prompting a slump in higher-yielding assets and a flight to the relative safety of government bonds.
France’s (GFRN10) 10-year yield dropped to as low as 1.441 percent yesterday and the rate on equivalent Finnish debt fell to 1.178 percent, both the least on record.
ECB Policy
The ECB left its main refinancing rate at a record-low 0.15 percent and the deposit rate at minus 0.1 percent on Aug. 7. Draghi said at a press conference in Frankfurt that day the rates will stay at present levels for an “extended period.”
A report due Aug. 14 will show euro-area growth slowed in the three months through June, according to the median estimate of economists in a Bloomberg News survey.
Data this week showed Italy returned to recession in the second quarter and German factory orders slumped the most since 2011 in June. Italy’s 10-year yield increased six basis points this week to 2.82 percent.
The rate on similar-maturity Spanish (GSPG10YR) bonds was little changed at 2.56 percent. German securities earned 6.2 percent this year through Aug. 7, Bloomberg World Bond Indexes show. Spain’s earned 10 percent, Italy’s 9.3 percent and Treasuries returned 3.9 percent.
bloomberg.com
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