Bloomberg News

German Two-Year Notes Rise as ECB’s Coene Says Rate Cut Probable

November 25, 2011

Nov. 25 (Bloomberg) -- German two-year notes rose, snapping a two-day drop, as Belgian’s de Tijd newspaper reported European Central Bank Governing Council member Luc Coene as saying an interest-rate cut is probable if current trends continue.

Thirty-year bonds snapped a three-day decline before Italy sells as much as 8 billion euros ($10.6 billion) of bills and 2 billion euros of zero-coupon notes. Hungary lost its investment- grade rating at Moody’s Investors Service as the Cabinet sought International Monetary Fund assistance.

“The Italian bill auction will be watched closely by the market,” Nick Stamenkovic, a fixed-income strategist at RIA Capital Markets Ltd. in Edinburgh, said yesterday in a telephone interview. “I reckon there will be reasonable demand from domestic buyers for the Italian bills, although rates may have to go higher.”

The yield on German two-year notes fell two basis points to 0.46 percent at 7:30 a.m. London time. The 0.25 percent securities due in December 2013 rose 0.035, or 35 euro cents per 1,000-euro face amount, to 99.585.

The rate on 30-year bonds was little changed at 2.79 percent, after climbing to 2.87 percent yesterday, the highest since Oct. 31.

German bonds have handed investors a return of 6.9 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Italian bonds have lost 11 percent.

--Editors: Nicholas Reynolds, Mark McCord

To contact the reporters on this story: Paul Dobson in London at pdobson2@bloomberg.net; Anchalee Worrachate in London at aworrachate@bloomberg.net

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


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