Business World

Tuesday 28 March 2017

German government bonds rise as stocks fall before debt sales

Matthew Brown

German government bonds rose as falling stock markets stoked demand for the safest assets before a sale of Spanish debt that will test the market’s appetite for debt from so-called peripheral euro-region nations.

The bund yield fell from near the highest level in two weeks.

Spain plans to sell as much as €3.5bn of 10- and 30-year bonds today after the yield premium on Spanish debt over bunds almost doubled over the last month.

The MSCI Asia Pacific Index of shares fell 0.3pc, its first decline in six days. France is also selling bonds today.

Bunds may “move clearly higher if the Spanish auctions show signs of stress,” WestLB AG strategists, including John Davies in London, wrote in a research report today.

“Given the continued negative headlines regarding the Spanish banking sector, Spanish bonds continue to trade under pressure.”

The German 10-year bund yield fell two basis points to 2.66pc as of 7:17am in London.

The 3pc security due July 2020 rose 0.16, or 1.6 euros per 1,000-euro face amount, to 103. Two-year yields were little changed at 0.5pc.

Spanish government bonds lost investors 4.3pc this year, compared with returns of 6.5pc for German bonds and a 15.5pc loss for Greek debt, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.

Bloomberg

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