Business World

Wednesday 21 February 2018

German bonds rise as 3pc yield on bunds draws investors

German government bonds rose, snapping a two-day decline, as appetite for the securities increased after declines this month sent 10-year yields above 3pc for the first time since May.

Thirty-year German bond yields rebounded from the highest in almost seven months.

Dutch, Italian and Belgian bonds also advanced after European Central Bank Governing Council member Nout Wellink said yesterday he’s not in favour of joint issuance of bonds in the euro region.

“The market is showing a healthy retracement after the rapid rise in yields,” said Orlando Green, assistant direct of capital-markets strategy at Credit Agricole Corporate & Investment Bank in London.

“There’s a little bit of a lull, but there’s an argument for a measured rise in yields because there are signs of economic recovery.”

The 10-year bund yield fell five basis points to 2.96pc as of 8:55am in London.

The 2.5pc security maturing in January 2021 rose 0.39, or 3.90 euros per 1,000-euro face amount, to 96.03. The yield on 30-year debt fell six basis points to 3.41pc.

Dutch 10-year bond yields fell five basis points to 3.16pc, and similar-maturity Belgian bond yields dropped eight basis points to 3.94pc. The Italian 10-year yield declined four basis points to 4.52pc.

Irish 10-year bonds were little changed, leaving the yield at 8.21pc.

Euro bonds are an “implicit transfer of money to other countries,” Wellink told reporters in Frankfurt yesterday. “It takes away incentives to behave better, because under the financing umbrella of the dominant powers you get better conditions to borrow money.”

Creating euro bonds would be “a very intransparent way of burden sharing,” Wellink added. “If you want to help another country, then you should do it in a very transparent way.”


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