German bunds rose, with 10-year yields dropping the most in four weeks, as euro-area surveys showed services and manufacturing output fell to a 39-month low in September, boosting demand for the region’s safest assets.
The extra yield investors demand to hold Spanish 10-year bonds instead of similar-maturity German securities widened as the nation sold 4.8 billion euros ($6.2 billion) of bonds this week, the most since January.
Spain’s bonds were supported amid speculation the nation would seek external aid. German two-year notes gained as the Mannheim-based ZEW Center for European Economic Research said Sept. 18 Germany’s current situation index fell to the lowest level since June 2010.
The euro-region surveys “dropped significantly, showing the economy as a whole is slowing,” said Christian Reicherter, an analyst at DZ Bank AG in Frankfurt.
“Bunds rebounded after significant losses in recent weeks. Many countries are already in recession and the German economy is slowing.”
Germany’s 10-year yield fell 11 basis points, or 0.11 percentage point, this week to 1.60 percent as of 5 p.m. London time yesterday, the biggest decline since the five-day period ending Aug. 24.
The 1.5 percent security due in September 2022 rose 0.99, or 9.90 euros per 1,000-euro face amount to 99.12. The two-year yield was at 0.04 percent, down seven basis points since Sept. 14.
Economic Contraction
A composite index based on a survey of purchasing managers in manufacturing and services in the euro area dropped to 45.9 from 46.3 in August, London-based Markit Economics said Sept. 20 in an initial estimate. That’s the lowest since June 2009. A reading below 50 indicates contraction.
Spain’s Deputy Prime Minister Soraya Saenz de Santamaria told opposition lawmakers Sept. 19 that they had called for the European Central Bank to buy government debt, setting out the case for an aid request. The ECB said Sept. 6 it will act to reduce borrowing costs if countries request assistance.
The Madrid-based Treasury sold 3.94 billion euros of new three-year notes on Sept. 20 at an average yield of 3.845 percent.
It also auctioned 859 million euros of its 10-year benchmark bond at an average of 5.666 percent, the lowest since January and compared with 6.647 percent when it was last sold on Aug. 2.
Spanish 10-year yields were little changed in the week at 5.76 percent, leaving the spread versus German bunds at 417 basis points, up from 408 basis points on Sept. 14.
Debt Sales
Germany is due to sell up to 5 billion euros of 10-year debt next week, while Italy, Belgium and the Netherlands are also scheduled to auction bonds.
The IFO Institute will say Sept. 24 that its business climate index was at 102.5 this month from 102.3 in August, according to the median estimate of 18 economists surveyed by Bloomberg. Last month’s reading was the lowest since March 2010.
“Next week we have the IFO and this should also point to slower growth in Germany,” DZ Bank’s Reicherter said. Ten-year yields will remain in a tight range, he said, predicting the rate will be at 1.60 percent in three months.
German bonds returned 2.5 percent this year through Sept. 20, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish securities added 1.4 percent, while Italy’s earned 16 percent.
bloomberg.com
The extra yield investors demand to hold Spanish 10-year bonds instead of similar-maturity German securities widened as the nation sold 4.8 billion euros ($6.2 billion) of bonds this week, the most since January.
Spain’s bonds were supported amid speculation the nation would seek external aid. German two-year notes gained as the Mannheim-based ZEW Center for European Economic Research said Sept. 18 Germany’s current situation index fell to the lowest level since June 2010.
The euro-region surveys “dropped significantly, showing the economy as a whole is slowing,” said Christian Reicherter, an analyst at DZ Bank AG in Frankfurt.
“Bunds rebounded after significant losses in recent weeks. Many countries are already in recession and the German economy is slowing.”
Germany’s 10-year yield fell 11 basis points, or 0.11 percentage point, this week to 1.60 percent as of 5 p.m. London time yesterday, the biggest decline since the five-day period ending Aug. 24.
The 1.5 percent security due in September 2022 rose 0.99, or 9.90 euros per 1,000-euro face amount to 99.12. The two-year yield was at 0.04 percent, down seven basis points since Sept. 14.
Economic Contraction
A composite index based on a survey of purchasing managers in manufacturing and services in the euro area dropped to 45.9 from 46.3 in August, London-based Markit Economics said Sept. 20 in an initial estimate. That’s the lowest since June 2009. A reading below 50 indicates contraction.
Spain’s Deputy Prime Minister Soraya Saenz de Santamaria told opposition lawmakers Sept. 19 that they had called for the European Central Bank to buy government debt, setting out the case for an aid request. The ECB said Sept. 6 it will act to reduce borrowing costs if countries request assistance.
The Madrid-based Treasury sold 3.94 billion euros of new three-year notes on Sept. 20 at an average yield of 3.845 percent.
It also auctioned 859 million euros of its 10-year benchmark bond at an average of 5.666 percent, the lowest since January and compared with 6.647 percent when it was last sold on Aug. 2.
Spanish 10-year yields were little changed in the week at 5.76 percent, leaving the spread versus German bunds at 417 basis points, up from 408 basis points on Sept. 14.
Debt Sales
Germany is due to sell up to 5 billion euros of 10-year debt next week, while Italy, Belgium and the Netherlands are also scheduled to auction bonds.
The IFO Institute will say Sept. 24 that its business climate index was at 102.5 this month from 102.3 in August, according to the median estimate of 18 economists surveyed by Bloomberg. Last month’s reading was the lowest since March 2010.
“Next week we have the IFO and this should also point to slower growth in Germany,” DZ Bank’s Reicherter said. Ten-year yields will remain in a tight range, he said, predicting the rate will be at 1.60 percent in three months.
German bonds returned 2.5 percent this year through Sept. 20, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish securities added 1.4 percent, while Italy’s earned 16 percent.
bloomberg.com
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