Bloomberg News

German Bunds Little Changed as ECB Keeps Interest Rate at 0.75%

November 08, 2012

German 10-year bonds were little changed after the European Central Bank kept its benchmark interest rate at a record-low 0.75 percent.

Two-year note yields were within three basis points of the lowest level in almost three months. The decision to keep the rate on hold was forecast by all but one of 63 economists in a Bloomberg News survey. ECB President Mario Draghi is due to hold a press conference at 2:30 p.m. in Frankfurt to explain the decision. Spanish 10-year bonds dropped for a second day after the nation sold 4.76 billion euros ($6.06 billion) of three-, five- and 20-year securities.

“Even though we don’t get a cut from the ECB this time, I suspect the language at the press conference will reflect the fact that forward-looking indicators have been quite weak, unemployment keeps rising and bank lending remains poor,” said Luca Jellinek, the head of European interest-rate strategy at Credit Agricole Corporate & Investment Bank in London. “Yields on core-nation bonds are likely to remain low.”

Germany’s 10-year bund yield added less than one basis point, or 0.01 percentage point, to 1.39 percent at 12:54 p.m. London time, after falling to 1.36 percent, the lowest level since Sept. 3. The 1.5 percent security due in September 2022 declined 0.075, or 75 euro cents per 1,000-euro face amount, to 101.015.

The nation’s two-year notes yielded minus 0.03 percent. The rate fell to minus 0.055 percent yesterday, the least since Aug. 13. A negative yield means investors who hold the security until it matures will receive less than they paid to buy it.

German bonds returned 3.9 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spain’s bonds rose 2.8 percent.

The German 10-year rate was little changed and similar- maturity Spanish yields climbed nine basis points when the ECB left rates unchanged on Oct. 4 and Draghi said policy makers didn’t discuss cutting interest rates.

To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net


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