Bloomberg News

Bund Yield 2 Basis Points From Record Low Before Debt Sales, ECB

May 03, 2012

German 10-year bund yields were two basis points from a record low as Spain and France prepared to auction debt today before the European Central Bank announces its interest-rate decision.

Spanish bonds held losses from yesterday before the government sells as much as 2.5 billion euros ($3.29 billion) of three-and five-year notes. France will auction up to 7.5 billion euros of securities due between 2017 and 2025. The ECB will keep its main refinancing rate at 1 percent, according to all 58 economists surveyed by Bloomberg. A report today is forecast to show euro-area producer-price inflation slowed in March.

“We expect the ECB to sound a bit more dovish then last time as things have deteriorated since April, but we don’t expect any rate action,” said John Wraith, a fixed-income strategist at Bank of America Merrill Lynch in London. “For now the risks are ones which encourage people to put money into safe havens, and Germany is the ultimate safe haven in Europe.”

The German 10-year yield rose one basis point, or 0.01 percentage point, to 1.62 percent at 9:22 a.m. London time, after falling to a record 1.599 percent yesterday. The 1.75 percent bond due in July 2022 fell 0.105, or 1.05 euros per 1,000-euro face amount, to 101.205.

Yields on German two-, five-, 10- and 30-year securities all dropped yesterday to the lowest since Bloomberg began tracking the data amid speculation Europe’s economic slump is deepening and exacerbating the region’s financial crisis.

Spanish Yields

Spain’s five-year note yield were little changed at 4.77 percent. French 10-year bond yields increased one basis point to 2.98 percent.

ECB President Mario Draghi will hold a press conference at 2.30 p.m. in Barcelona to explain the central bank’s decision. Policy makers kept the rate at 1 percent at their previous monetary-policy meeting on April 4.

Producer prices in the 17-nation euro region rose 3.4 percent from a year earlier, after increasing 3.6 percent in February, according to economists in a Bloomberg survey.

German bonds returned 1.6 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish securities lost 1.2 percent, and French debt gained 2.3 percent.

To contact the reporters on this story: Lucy Meakin in London at lmeakin1@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net

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


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