Low returns dampen demand at German debt sale

Safe-haven Germany offered the lowest ever return of 1.75 percent on its 10-year government bonds on Wednesday, dampening demand for its debt despite concerns about Spain and Italy. Investors sold Spanish debt on Tuesday and yields jumped at an Italian bill auction on Wednesday, on doubts about whether those countries can keep debt and deficits in check. This had drawn attention to the auction of Germany's low risk debt.
As was the case at the height of the euro zone debt crisis in November last year, the low yields in Germany led to fewer bids than the amount on offer, a phenomenon which debt experts term as a technically uncovered auction. The new 10-year Bund offered a record low coupon of 1.75 percent and the average yield at auction was 1.77 percent, also an all-time low. "The market looks to have got a nosebleed at these levels," Credit Agricole rate strategist Peter Chatwell said.