German short-dated government bond yields fell to record lows on Friday, recording their biggest weekly drop since 2011. The European Central Bank's bond-buying programme and speculation that it will buy more shorter-dated debt for the scheme have helped drive two-year German bond yields down.
That trend has gathered pace along with concern over the French far right's strong polling ahead of presidential elections in April and May. Germany, the euro zone's biggest economy, is the bloc's benchmark bond issuer and its government debt is widely regarded as among the safest assets in the world.
"It's very hard to decompose all the elements behind the fall in two-year German bond yields," said Martin van Vliet, a senior rates strategist at ING.
To free up more bonds for its massive stimulus programme, the ECB in December scrapped a rule that prevented it from buying bonds yielding below its -0.40 percent deposit rate.
German yields fell across the curve on Friday, as doubt about the impact of US President Donald Trump's economic policies pushed US bond yields lower.
The two-year Schatz yield fell 5 bps to a record low of minus 0.95 percent. It is set to end the week around 15 basis points lower - a steeper drop than in any single week since December 2011. France's 10-year bond yield hit a one-month low at 0.92 percent and was set to end the week with a fall of about 11 bps - its biggest weekly fall since July. Italian bonds were a relative underperformer. As 10-year Bund yields hit a near two-month low at 0.18 percent, the gap with Italian peers widened back near three-year highs above 200 basis points.
Comments
Comments are closed for this article.