Bloomberg News

German Two-Year Yield Rises Above Zero for First Time in 5 Weeks

August 21, 2012

German two-year note yields rose above zero for the first time in more than five weeks as speculation the euro-area debt crisis is abating damped demand for the region’s safest assets.

The yield climbed four basis points to 0.017 percent at 4:20 p.m. London time after being negative since July 12. The rate fell to a record low of minus 0.097 percent on July 31 and Aug. 2. The zero percent bond due in June 2014 dropped 0.07, or 70 euro cents per 1,000-euro ($1,249) face amount, to 99.97.

“We have seen a generalized improvement in risk appetite since the last European Central Bank meeting, resulting in an unwinding of safe-haven flows,” said Nick Stamenkovic, a fixed- income strategist at broker RIA Capital Markets in Edinburgh. “The rise in two-year German yields is another illustration of this. Much will depend on the outcome of the ECB meeting in early September.”

A negative yield means investors who hold the security until it matures will receive less than they paid to buy it.

Yields below zero showed the euro-area economy isn’t “doing well,” European Economic and Monetary Affairs Commissioner Olli Rehn said in a Bloomberg Television interview on Aug. 14.

German 10-year bunds also declined, with the yield rising six basis points to 1.57 percent.

German government bonds handed investors a loss of 1.2 percent this month through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.

To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net

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


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