* Demand for new German bond strong after rise in yields
* First German euro bond to carry restructuring clause
* Bunds rally after auction
By Emelia Sithole-Matarise
LONDON, Jan 9 Investors snapped up 4 billion
euros worth of new five-year German bonds on Wednesday, lured by
higher yields after a recent sharp sell-off in the euro zone's
The bond maturing in February 2018 drew bids worth 1.8 times
the amount allocated, slightly less than at the previous
five-year sale in November and a 2012 average of 1.96 times.
It sold at an average yield of 0.53 percent, compared with
0.42 percent last time. For details see
German bond prices slid last week after a deal to avert a
U.S. fiscal crisis cooled demand for safe-haven debt, driving
five-year yields up 20 basis points to their highest in more
than a month.
The deal and tentative signs the world's biggest economy was
on a recovery path spurred the sell-off but demand for German
debt recovered this week as the higher yields attracted
investors and with the euro zone economic outlook still fragile.
"Demand was quite good. The market has been supported by the
last jump in yields ... It means the sell-off last week may have
gone too far and investors used it as an opportunity to go back
into core markets," said ING strategist Alessandro Giansanti.
Expectations that the European Central Bank will keep
interest rates at record lows at its policy meeting on Thursday
also helped to prop up demand for the German debt.
Shorter-dated German debt is highly sensitive to shifts in
ECB monetary policy and investors would be looking to signals
from policymakers on Thursday on when next the bank would cut
The German Bund future rose 24 ticks on the day to
143.66 from 143.48 before the sale while five-year yields
were 3 basis points lower at 0.46 percent in the
secondary market, unchanged from before.
Demand at bond sales from the Netherlands and Austria on
Tuesday show investors remain keen to hold safer euro zone
assets even though the higher yields offered by Italian and
Spanish bonds, combined with backstop of the promise of ECB
intervention, has driven them back into those markets.
"With today's auction what we see is there's still caution
out there but given there's just so much liquidity out there we
can see Bunds performing well and at the same time as other core
and semi-paper," said Michael Leister, a strategist at
The new five-year bond is Germany's first denominated in
euros to include a collective action clause (CAC), intended to
make it easier to restructure government bonds in a crisis.
All new euro zone government bonds issued from the beginning
of this year will carry CACs, the first time that such legal
provisions have been included routinely in a developed market.
The Netherlands issued the bloc's first euro-denominated
bond with the new provision on Tuesday.