Bloomberg News

German Note Sale Said to Be Shunned by Investors on Low Yield

September 28, 2011

Sept. 28 (Bloomberg) -- Germany’s five-year note auction failed to draw any bids from investors, with only banks obliged to participate bidding for the securities, said six people with knowledge of the sale.

Yields close to all-time lows deterred investors, said five of the people, who declined to be identified because information about the buyers is confidential. “This auction might not be perfect, but it’s not our worst,” Carl Heinz Daube, the head of the Frankfurt-based debt agency, said in a telephone interview. He declined to comment on today’s buyers.

Germany received bids for 5.1 billion euros ($7 billion) of the notes maturing in October 2016, less than the maximum available 6 billion euros of securities, according to the results from the Bundesbank. It allocated 5 billion euros at an average yield of 1.22 percent, the lowest rate since Bloomberg began collecting the data in 1993.

“The weaker than expected five-year auction result reflects investor sentiment after a decent rally in equities over the last couple of days and headlines over Germany’s role in any euro area bailout,” said Grant Peterkin, a senior money manager at Ignis Asset Management in Glasgow, which has 76.2 billion pounds ($119 billion) under management. “With the ECB meeting next week, despite economic data globally suggesting weaker growth, investors may be concerned that rate cuts aren’t coming as soon as expected.”

Yield Climbs

Five-year German note yields rose as high as 1.30 percent following the sale and were at 1.24 percent as of 3:11 p.m. in London, according to generic yield data compiled by Bloomberg.

“The auction is technically uncovered, but given the market volatility we are not surprised,” Daube said. “We are not concerned about this as we will be able to sell it to the market, and therefore this posed no risk to our funding.”

Euribor futures declined, pushing the implied yield on the contract expiring in December up seven basis points to 1.26 percent, signaling investors have reduced wagers on lower interest rates. The ECB has increased its refinancing rate twice this year to 1.50 percent. It announces its next rate decision on Oct. 6.

--Editors: Daniel Tilles, Mark Gilbert

To contact the reporters on this story: Keith Jenkins in London at; Anchalee Worrachate in London at; Brian Parkin in Berlin at

To contact the editor responsible for this story: Daniel Tilles at

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