Bloomberg News

German Bond Sale Gets Fewer Bids Than Securities on Offer

October 19, 2011

(Updates with analyst comment in third paragraph.)

Oct. 19 (Bloomberg) -- Germany received fewer bids than the maximum amount of securities offered at an auction of 10-year bonds as investors judged yields were too low amid optimism Europe is making progress to resolve its sovereign debt crisis.

The country got bids for 4.55 billion euros ($6.3 billion) at its offering of as much as 5 billion euros of 2.25 percent debt, the Bundesbank said today in a statement. Germany sold 4.075 billion euros at an average yield of 2.09 percent, up from a Sept. 21 sale at 1.80 percent, a record low. Bunds fell today as stocks gained amid demand for higher-yielding assets.

“German paper is very expensive,” Annalisa Piazza, a fixed-income strategist at broker Newedge Group in London, said in a telephone interview. “Any news that something is moving in terms of the development of the European crisis or any better- than-expected data was going to hit the long end of the curve.”

The auction today mirrors “increased nervousness,” while demand “endures in a volatile market,” a statement from Germany’s Federal Finance Agency said.

Germany’s benchmark 10-year yield dropped to a record low 1.636 percent on Sept. 23 amid investor concern that European leaders were struggling to resolve the debt crisis, which forced Greece, Portugal and Ireland to seek outside aid and threatened to infect larger economies such as Italy and Spain.

The yield on the bund climbed nine basis points to 2.10 percent at 12:23 p.m. London time, rising to as high as 2.13 percent.

--Editors: Daniel Tilles, Matthew Brown

To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net; Brian Parkin in Berlin at bparkin@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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