LONDON/BERLIN: Low yields suppressed investor appetite for a German 10-year benchmark Bund tap on Wednesday, resulting in Berlin's third failed auction of the bond.
Germany sold 3.25 billion euros in an auction that drew bids worth 3.7 billion euros, less than the 4 billion euros of debt on offer.
Secondary market yields on 10-year Bunds, the benchmark for euro zone borrowing costs, rose 1 basis point on the day to 0.61 percent.
"At these levels, investors are not prepared to increase exposure aggressively, given the continued resilience in the euro zone economy," said Nick Stamenkovic, bond strategist at RIA Capital Markets.
"Auction demand was pretty sluggish, which didn't provide too much support for the ten-year Bund." Such results are not uncommon in Germany and do not raise worries about the government's ability to finance itself.
But analysts often see them as a useful snapshot of investor demand.
The result of the auction was poor despite expectations of 16 billion euros in German bond repayments on Friday.
Germany has experienced a number of technical "fails" - when the sum of bids undershoots the amount on offer - at auctions this year, including the 10-year benchmark bond's launch in July and a tap of the same bond in September.
In addition, all six auctions of a German bond maturing in August 2046 have failed.
This was the first time since the German finance agency began compiling comparable records in 2007 that every auction of a single bond or bill has failed. Investors have been deterred by meagre yields and new regulation that limit banks' ability to broker the debt.
Since last month's 10-year sale, secondary market Bund yields have fallen around 10 basis points.
In September, Germany said it would cut its debt issuance plans by 6 billion euros in the fourth quarter by selling less short-term debt.
Most euro zone government bond yields rose around 1 bp on rising global equities and oil prices, as fading expectations for an increase in US interest rates supported demand for riskier assets.
Comments
Comments are closed for this article.