* Schatz sale finds buyers despite greater risk appetite
* U.S. fiscal deal limits demand as riskier assets rally
* Auction yield positive for the first time since October
By William James
LONDON, Jan 2 Germany sold 4.15 billion euros of
bonds on Wednesday, kicking off its 2013 funding with a two-year
debt sale that found buyers despite an overnight U.S. budget
deal that stirred appetite for higher-yielding assets.
The bonds were sold at a positive yield for the first time
since October, and the volume of bids was lower than at recent
sales, reflecting reduced demand for German debt which is used
as a safe haven in times of market stress.
While the auction was comfortably covered, average yields
were 0.01 percent compared to the average of -0.015 percent at
the two previous auctions of the 2014 bond.
German bonds fell steeply in the secondary market on
Wednesday after U.S. lawmakers approved a last-minute deal to
avert an imminent fiscal crisis that would have tipped the
world's largest economy into recession.
"It looks all right... yields in positive territory
certainly helped to generate some demand but bid/cover ratio of
1.5 is indicating the 'risk on' sentiment from (the deal to
avoid) the fiscal cliff prevented a better outcome," said
Michael Leister, senior strategist at Commerzbank in London.
The auction of drew bids worth 1.5 times the amount
allocated to investors, below the 1.9 ratio seen at two sales of
the same bond late last year.
While affected by the increased appetite for riskier and
higher-yielding assets, the auction confirmed that investors see
interest rates in Europe staying low over the long term, and are
still prepared to accept an ultra-low yield in return for a safe
place to store their cash.
The German authorities retained 17 percent of the amount
issued for sale at a later date, above the average of the
previous two auctions but in line with historical levels.
"All in all, today's German auction was 'average' but demand
was much less dynamic than in the previous three two-year taps,"
said Annalisa Piazza, market economist at Newedge.
Analysts also cited the redemption of a 24 billion euro
German bond on Friday as a supportive factor for the auction.
The 5 billion euros of debt issued, including the portion
retained by authorities, was Germany's first step towards a
target of 173 billion euros of long-term nominal bonds it plans
to sell this year.