Tags: German | Yields | Spanish | Bonds

German Yields Fall to Records as Spanish Bonds Drop

Wednesday, 02 May 2012 09:34 AM

German government bonds rose, driving the nation’s borrowing costs to record lows, on speculation Europe’s economic slump is deepening and exacerbating the region’s financial crisis.

Yields on German two-, five-, 10- and 30-year securities fell to all-time lows as reports showed unemployment in the euro area rose in March and manufacturing contracted for a ninth month in April, stoking demand for the safest fixed-income assets. Spanish and Italian 10-year bonds declined as the region’s debt markets reopened after closing for a holiday yesterday. Portuguese securities advanced as the nation auctioned 203- and 378-day bills.

“Bunds have been trading at low levels for a while and all they required was the miserable Purchasing Managers’ Index numbers to take them to fresh lows,” said Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London, referring to yields on the securities. “For those investors that have to have a proportion of their portfolios invested in euros, there are few other options.”

The rate on benchmark 10-year bunds fell as much as four basis points, or 0.04 percentage point, to a record-low 1.625 percent, and was last at 1.63 percent at 12:36 p.m. London time. The 1.75 percent securities maturing in July 2022 rose 0.31, or 3.10 euros per 1,000-euro ($1,314) face amount, to 101.11.

Two-year yields reached 0.072 percent, five-year rates touched 0.575 percent and 30-year yields slid to as low as 2.331 percent. Bund futures rose to an all-time high of 141.54.

Spanish Yields

Spanish 10-year yields rose nine basis points to 5.86 percent from April 30 and the rate on similar-maturity Italian climbed four basis points to 5.56 percent.

The euro-area factory gauge based on a survey of purchasing managers slipped to 45.9 from 47.7 in March, London-based Markit Economics said today. That’s the lowest in 34 months and compares with an estimate of 46 published on April 23. A reading below 50 indicates contraction.

For Italy, the gauge tumbled to 43.8 last month from 47.9 in March. The German, Spanish and French indexes also showed a contraction.

“The sharp fall in Italian PMI and continued downward trend in Spanish, French and German PMI is the main driver of the selloff in Spanish debt,” said Brian Barry, an analyst at Investec Bank Plc in London. That underscores “the fragility of the underlying fundamentals,” he said.

Joblessness in the 17-nation euro area increased to 10.9 percent in March from 10.8 percent the month before.

German unemployment unexpectedly rose in April, with the number of people out of work increasing a seasonally adjusted 19,000 to 2.87 million, the Nuremberg-based Federal Labor Agency said today.

Portuguese two-year note yields dropped to as low as 8.27 percent, the least since March 31, 2011, as the nation sold 1.5 billion euros of six- and 12-month bills.

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Wednesday, 02 May 2012 09:34 AM
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