German government bonds were little changed amid speculation the European Central Bank may increase the interest banks pay for some loans, even as data showed the economy is still suffering the after-effects of the recession.
The yield on the 10-year bund traded within one basis point of its lowest level since Nov. 3 after German consumer confidence unexpectedly declined for a second month and Italian retail sales dropped. People familiar with the ECB discussions said officials are debating whether to put an adjustable interest rate on December’s 12-month loans. Germany and Italy sold 6.6 billion euros ($9.9 billion) of securities today.
“We’ve had a bit of disappointing data this morning,” said Marius Daheim, a senior fixed-income strategist in Munich at Bayerische Landesbank, Germany’s second-largest state-owned lender. “This gives the bond market support.”
The 10-year bond yield fell 2 basis points to 3.24 percent as of 1:10 p.m. in London. The 3.25 percent security due January 2020 rose 0.13, or 1.30 euros per 1,000-euro ($1,507) face amount, to 100.11. The yield on the two-year note rose 1 basis point to 1.33 percent.
Central banks across the world are mulling withdrawing the stimulus programs they introduced to counter the worst recession since World War II. The 10-year bund yield increased 3 basis points on Nov. 5 after European Central Bank Governor Jean- Claude Trichet said policy makers would withdraw some measures.
ECB Measures
The ECB began buying covered bonds this year, offered banks unlimited loans and cut the main refinancing rate to a record low of 1 percent.
If the ECB “makes the risk for anyone who takes the liquidity higher, you decrease the demand for it,” said Michael Markovic, a senior fixed-income strategist at Credit Suisse Group AG in Zurich. “That would automatically lead to lower participation of banks” in bond sales, he said.
German consumer confidence for December unexpectedly declined as households grew more concerned about job security, according to GfK AG. The market-research company said its sentiment index, based on a survey of about 2,000 people, fell to 3.7 from 4 in November. Economists forecast the index would hold steady, according to the median of 15 estimates in a Bloomberg survey.
Italian retail sales fell 0.1 percent in September from the month before, missing analyst estimates for a 0.1 percent increase.
Bond Sales
Germany sold 4.1 billion euros of 2.5 percent five-year notes at an average yield of 2.35 percent. Italy sold 2.5 billion euros of zero-coupon bonds maturing in September 2011 at an average yield of 1.48 percent.
Austria canceled its December bond auction because of “lower financing needs,” the country’s Federal Financing Agency said on its Web site yesterday. The country sold 23.5 billion euros of bonds this year, according to Bloomberg calculations.
The yield on the 10-year Greek bond rose 5 basis points to 5.04 percent. The difference in yield, or spread, between 10-year Greek government bonds and equivalent-maturity.
The yield on the 10-year bund traded within one basis point of its lowest level since Nov. 3 after German consumer confidence unexpectedly declined for a second month and Italian retail sales dropped. People familiar with the ECB discussions said officials are debating whether to put an adjustable interest rate on December’s 12-month loans. Germany and Italy sold 6.6 billion euros ($9.9 billion) of securities today.
“We’ve had a bit of disappointing data this morning,” said Marius Daheim, a senior fixed-income strategist in Munich at Bayerische Landesbank, Germany’s second-largest state-owned lender. “This gives the bond market support.”
The 10-year bond yield fell 2 basis points to 3.24 percent as of 1:10 p.m. in London. The 3.25 percent security due January 2020 rose 0.13, or 1.30 euros per 1,000-euro ($1,507) face amount, to 100.11. The yield on the two-year note rose 1 basis point to 1.33 percent.
Central banks across the world are mulling withdrawing the stimulus programs they introduced to counter the worst recession since World War II. The 10-year bund yield increased 3 basis points on Nov. 5 after European Central Bank Governor Jean- Claude Trichet said policy makers would withdraw some measures.
ECB Measures
The ECB began buying covered bonds this year, offered banks unlimited loans and cut the main refinancing rate to a record low of 1 percent.
If the ECB “makes the risk for anyone who takes the liquidity higher, you decrease the demand for it,” said Michael Markovic, a senior fixed-income strategist at Credit Suisse Group AG in Zurich. “That would automatically lead to lower participation of banks” in bond sales, he said.
German consumer confidence for December unexpectedly declined as households grew more concerned about job security, according to GfK AG. The market-research company said its sentiment index, based on a survey of about 2,000 people, fell to 3.7 from 4 in November. Economists forecast the index would hold steady, according to the median of 15 estimates in a Bloomberg survey.
Italian retail sales fell 0.1 percent in September from the month before, missing analyst estimates for a 0.1 percent increase.
Bond Sales
Germany sold 4.1 billion euros of 2.5 percent five-year notes at an average yield of 2.35 percent. Italy sold 2.5 billion euros of zero-coupon bonds maturing in September 2011 at an average yield of 1.48 percent.
Austria canceled its December bond auction because of “lower financing needs,” the country’s Federal Financing Agency said on its Web site yesterday. The country sold 23.5 billion euros of bonds this year, according to Bloomberg calculations.
The yield on the 10-year Greek bond rose 5 basis points to 5.04 percent. The difference in yield, or spread, between 10-year Greek government bonds and equivalent-maturity.
(Source: Bloomberg News)
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