German 10-year bonds climbed for a third week as a report showed inflation slowed to a five-year low in the euro area, boosting bets the European Central Bank will take more steps to revive the region’s economy.
Most government bonds across Europe ended the week higher, even after paring gains following ECB President Mario Draghi’s failure to provide details on the size of its planned purchases of asset-backed securities and covered bonds.
Germany sold 10-year bonds to yield less than 1 percent for the first time on record, while Italy, Spain and France also auctioned debt.
“The big one was the inflation numbers for the euro zone,” said David Schnautz, a fixed-income strategist at Commerzbank AG in New York.
“That fueled hope their could be another Draghi moment where the ECB surprised on the dovish side. The ECB only did what was to be expected, so that was a setback.”
Germany’s 10-year yield declined five basis points, or 0.05 percentage point, this week to 0.93 percent at 5 p.m. London time yesterday.
The 1 percent bund due in August 2024 climbed 0.46, or 4.60 euros per 1,000-euro ($1,252) face amount, to 100.7.
“We are going to gear our action according to how the medium-term outlook of our inflation expectations will develop in the coming months,” Draghi told reporters in Naples following a meeting where the institution kept its key interest rates at a record-low 0.05 percent.
Consumer prices in the euro area increased 0.3 percent in September, down from 0.4 percent a month earlier, the European Union’s statistics office in Luxembourg said Sept. 30.
“Draghi didn’t change the sentiment,” Commerzbank’s Schnautz said. “It’s more a question of when, not if. They are inching closer, but the market was hoping for more this week.
The market just got a bit ahead of itself.”
The rate on 10-year (GSPG10YR) Spanish bonds fell nine basis points to 2.10 percent this week, while the yield on similar-maturity Italian bonds dropped eight basis points to 2.31 percent. Germany allotted 4.1 billion euros of 1 percent securities due in August 2024 on Oct. 1 at an average yield of 0.93 percent.
That’s the least since Bloomberg started tracking the data in 1993. The rate underscores the meager returns institutional investors are prepared to accept compared with the near- or below-zero rates for parking cash with the ECB.
Austria, Ireland and Germany are among euro-area governments due to sell debt next week, while a Oct. 6 report will show German factory orders dropped in August, according to the median estimate of economists in a Bloomberg News survey.
German government securities returned 7.6 percent this year through Oct. 2, Bloomberg World Bond Indexes show. Spain’s earned 14 percent and Italy’s 13 percent.
bloomberg.com
Most government bonds across Europe ended the week higher, even after paring gains following ECB President Mario Draghi’s failure to provide details on the size of its planned purchases of asset-backed securities and covered bonds.
Germany sold 10-year bonds to yield less than 1 percent for the first time on record, while Italy, Spain and France also auctioned debt.
“The big one was the inflation numbers for the euro zone,” said David Schnautz, a fixed-income strategist at Commerzbank AG in New York.
“That fueled hope their could be another Draghi moment where the ECB surprised on the dovish side. The ECB only did what was to be expected, so that was a setback.”
Germany’s 10-year yield declined five basis points, or 0.05 percentage point, this week to 0.93 percent at 5 p.m. London time yesterday.
The 1 percent bund due in August 2024 climbed 0.46, or 4.60 euros per 1,000-euro ($1,252) face amount, to 100.7.
“We are going to gear our action according to how the medium-term outlook of our inflation expectations will develop in the coming months,” Draghi told reporters in Naples following a meeting where the institution kept its key interest rates at a record-low 0.05 percent.
Consumer prices in the euro area increased 0.3 percent in September, down from 0.4 percent a month earlier, the European Union’s statistics office in Luxembourg said Sept. 30.
“Draghi didn’t change the sentiment,” Commerzbank’s Schnautz said. “It’s more a question of when, not if. They are inching closer, but the market was hoping for more this week.
The market just got a bit ahead of itself.”
The rate on 10-year (GSPG10YR) Spanish bonds fell nine basis points to 2.10 percent this week, while the yield on similar-maturity Italian bonds dropped eight basis points to 2.31 percent. Germany allotted 4.1 billion euros of 1 percent securities due in August 2024 on Oct. 1 at an average yield of 0.93 percent.
That’s the least since Bloomberg started tracking the data in 1993. The rate underscores the meager returns institutional investors are prepared to accept compared with the near- or below-zero rates for parking cash with the ECB.
Austria, Ireland and Germany are among euro-area governments due to sell debt next week, while a Oct. 6 report will show German factory orders dropped in August, according to the median estimate of economists in a Bloomberg News survey.
German government securities returned 7.6 percent this year through Oct. 2, Bloomberg World Bond Indexes show. Spain’s earned 14 percent and Italy’s 13 percent.
bloomberg.com
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