LONDON: Investors ditched high-rated debt assets on Tuesday to make room for ultra-long Dutch and French bonds coming to market, putting a halt on German Bund yields' push towards new lows.
The Netherlands sell 0.75-1.25 billion euros of 30-year bonds, while France has begun marketing 20- and 50-year bonds for a syndicated sale.
Some investors will use the debt sales as an opportunity to switch from German debt into slightly higher-yielding Dutch and French bonds, which are also relatively safe. Ultra-long maturities will bear most of the brunt, but 10-year paper is expected to suffer as well.
"The French syndication announcement came as a bit by surprise," said Nordea chief fixed income analyst Jan von Gerich.
But he saw recent trends picking up again. "Supply is the driver now ... but the big picture has not changed and we will go towards zero in the 10-year (Bund)," he said.
German 10-year Bund yields were up 2 basis points on the day at 0.13 percent, having hit a one-year low of 0.075 percent on Monday. That was close to a record low of 0.05 percent hit last April.
Thirty-year German bond yields rose to 0.84 percent, up 4 basis points in line with their Dutch and French peers.
Governments have taken advantage of the low yields to focus issuance on longer-term maturities and ease the near-term debt repayment pressure built up during the euro zone sovereign crisis, when investors were reluctant to take the risk of holding long-dated paper.
Despite the unexpected French sale, flows will still be broadly supportive for euro zone government bonds, with some 55 billion euros in coupon payments and redemptions coming back to investors this week.
The European Central Bank's enhanced bond-buying programme is also applying downward pressure on yields.
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