Bloomberg News

German Yields Surge to 14-Month High as Debt Slump Intensifies

June 21, 2013

German government bonds dropped for a second day, pushing 10-year (GDBR10) yields to the highest level since April 2012, as demand for fixed-income assets fell amid concern that policy makers around the world will reduce stimulus.

Benchmark bunds posted the biggest weekly loss in five months and all euro-region sovereign bonds declined after Federal Reserve Chairman Ben S. Bernanke said policy makers may end stimulus in mid-2014. Greece’s 10-year rates rose above 11 percent to the highest in almost two months the Democratic Left party said it had left the nation’s coalition government.

“Selling pressure continues, not only on bunds, but global fixed income,” said Michael Leister, an interest-rate strategist at Commerzbank AG in London. “This pattern seems to suggest that these policy-accommodation-removal concerns are still weighing on the market.”

Germany’s 10-year bund yield rose six basis points, or 0.06 percentage point, to 1.73 percent at 5 p.m. London time after reaching 1.74 percent, the highest since April 26, 2012. The price of the 1.5 percent security due in May 2023 fell 0.54, or 5.40 euros per 1,000-euro ($1,312) face amount to 97.97. Ten-year yields headed for a weekly increase of 21 basis points, the most since the five-day period ended Jan. 4.

‘Alarming’ Yields

Greek 10-year bonds declined for a third day, pushing the yield above 11 percent for the first time since May 2. The rate advanced 64 basis points to 11.30 percent, after touching 11.64 percent, the highest level since April 29.

Greece’s Democratic Left, which holds 14 parliamentary seats, has asked ministers and officials to resign their government positions, it said in an e-mailed statement. The remaining coalition partners New Democracy and Pasok have 153 seats in 300-seat chamber.

“The yield increase in peripherals is becoming alarming,” Peter Schaffrik, head of European interest-rate strategy at Royal Bank of Canada in London, wrote in a note to clients. That may prompt the European Central Bank to take some action, “at least verbally,” he said.

Spain’s 10-year bond yield rose six basis points to 4.91 percent, after earlier falling nine basis points. The rate has increased 33 basis points this week, the most since the period ended Aug. 31, 2012.

Spanish 10-year yields have dropped from a euro-era record 7.75 percent set on July 25 and have returned 4.6 percent this year through yesterday, according to the Bloomberg Spain Sovereign Bond Index. The yield reached this year’s low of 3.94 percent on May 3.

Italy’s 10-year yield climbed seven basis points to 4.62 percent, while the rate on similar-maturity French (GFRN10) debt increased as much as six basis points to 2.33 percent, the highest since July 11, 2012.

German bonds handed investors a loss of 1.6 percent this year through yesterday, according to Bloomberg World Bond Indexes. (BSPS) Italian bonds earned 1.9 percent.

To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Lucy Meakin in London at lmeakin1@bloomberg.net

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


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