BERLIN: Germany's cost of borrowing over 30 years fell to its lowest ever at an auction of 2 billion euros in bonds on Wednesday, although the ultra low returns reduced overall appetite for the safe haven debt.
The sale of the 2.5 percent bonds maturing in 2044 came at a yield of 2.16 percent, the lowest ever at a German 30-year bond sale. The previous low was 2.17 percent, reached last July, when markets were in full-blown crisis mode.
As per standard procedure, German authorities held onto part of the offer to sell later on the secondary market, placing a total of 1.683 billion euros with bidders.
German yields have fallen back towards their lowest ever levels over the past two months as concerns about inconclusive Italian elections and an unprecedented levy on bank depositors in Cyprus have pushed investors towards safe-haven assets.
Expectations that the European Central Bank will likely cut rates at its policy meeting next week likely contributed to sending the yield on German debt lower on Wednesday.
The top-up auction attracted bids for 1.5 times the amount sold, less than the 1.8 seen in the January sale, Bundesbank data showed.
"Demand was a bit smaller than at the previous auction but on the other hand we are at very low yield levels with expectations that the European Central Bank will cut rates next week
So it was a good result," said Alessandro Giansanti, rate strategist at ING in Amsterdam.
Earlier on Wednesday Germany's Ifo survey showed business sentiment falling in April for the second consecutive month, missing even the lowest estimate in a Reuters poll and signalling that Europe's largest economy is struggling to pull away from a contraction at the end of last year.
A purchasing managers' survey earlier this week showed the private sector contracting and other recent data has shown investor sentiment worsening, unemployment rising, industry orders climbing, output ticking up and exports falling.
The poor numbers add to the case for the European Central Bank to cut interest rates at its meeting next week by suggesting that even the region's growth engine is heading back into contraction.
Investors have been looking to longer-dated maturities of late in search for higher returns than those offered by shorter-dated paper.
For a table of auction results, click on.
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