May 6, 2020 / 7:57 AM / a month ago

German bond yields rise as country launches first public bond sale since 2015

* Germany announces guidance on new 15-year syndicated issue

* Outstanding Bund yields rise 1-2 bps across the curve

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr

By Abhinav Ramnarayan

LONDON, May 6 (Reuters) - German borrowing costs rose on Wednesday ahead of the expected launch of the country’s first syndicated bond sale in half a decade, as it prepares to support an economy already hammered hard by the COVID-19 crisis.

Bleak economic data out earlier in the session underscored the need for extra funding, and Germany on Wednesday launched a 15-year bond sale via syndication; a process where the borrower appoints banks to sell debt to investors.

Normally, Germany only sells debt through closed auctions. But it announced new syndicated issues earlier this year as part of increased funding needs, after the German government said it would increase spending to try and prop up the economy through a potentially-damaging recession.

“In the very near term, the force that will dominate the market is supply. The 15-year syndication from Germany will be at least 5 billion euros in size and that will put pressure on the market,” said ING rates strategist Antoine Bouvet.

Bond yields tend to rise when there is a bond sale coming, as investors make room for new supply and adjust for the increase in the outstanding debt.

“We are in the post-ECB, post-Fed week, so I expect a number of refinancing announcements which could be skewed towards the longer end,” said Bouvet, referring to central bank meetings from last week. Both France and Spain are scheduled to hold debt auctions in the near future, he added.

Germany’s benchmark 10-year yields rose two basis points to -0.55%, though it remains close to seven-week lows hit on Tuesday.

The longer-dated 30-year bonds were up over a basis point to -0.12%.

The German syndication launch comes on a day when data showed orders for industrial goods in Europe’s biggest economy hit their lowest since records began in 1991, as the coronavirus slashed domestic and foreign demand for goods.

Elsewhere, other euro zone government bond yields remained fairly steady as investors digested the shock news from Tuesday that a German constitutional court had given the European Central Bank three months to justify bond purchases under its flagship stimulus programme.

Italian bond yields, which had spiked on the news, rose another basis point or so, with 10-year yields at 1.88% and the closely-watched spread over Germany at 243 basis points. ,

Reporting by Abhinav Ramnarayan, Editing by William Maclean

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