LONDON: German Bund yields held close to eight-month lows on Wednesday before an auction of 10-year debt on the heels of a bond sale that drew fewer bids than the amount on offer.
The offer of 5 billion euros of February 2024 Bunds last month attracted bids worth 4.3 billion euros. A sale of 30-year bonds three weeks ago suffered a similar fate.
Some analysts attribute the lack of appetite to low yields and since then tensions between the West and Moscow over Crimea have pushed yields even lower as investors seek top-rated assets to protect their money from geopolitical risks.
The trend contrasts with analysts' expectations at the end of last year that Bund yields would gradually rise in 2014.
Ten-year Bund yields, the benchmark for euro zone borrowing costs, were last half a basis point higher on the day at 1.574 percent, having hit an eight-month low of 1.506 percent last week.
Even with this week's bounce, the yields are below the 1.64 percent average of the last auction. At the end of last year, they were just below 2 percent.
"Ten-year yields currently trade close to their low since the start of the year and another sloppy auction cannot be ruled out," Newedge Strategy market economist Annalisa Piazza said. Germany plans to sell 4 billion euros.
The results of the auction are due around 1030 GMT.
Technically uncovered auctions are not unusual in Germany, which offers fewer incentives to primary dealers than other euro zone sovereigns and such events have never caused concerns about the regional powerhouse's ability to finance itself.
They tend to occur when yields are low and when the market is more volatile.
"It's always a chance that German auctions go uncovered, but this hasn't been a big issue," Jan von Gerich, chief strategist at Nordea in Helsinki, said.
"It is partly related to the way German auctions (are organised) but if you look at how they perform in the secondary market, I don't think anybody has any doubts whether there's demand for Bunds or not."
Auctions of shorter-dated German debt this year have been smoother, with demand underpinned by expectations among some investors that the European Central Bank could ease monetary policy further this year to fight low inflation.
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