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UPDATE 1-German Bund yield set for biggest daily jump since early July as selloff deepens
September 12, 2017 / 3:44 PM / a month ago

UPDATE 1-German Bund yield set for biggest daily jump since early July as selloff deepens

(Adds more detail, comment)

* Bund yields jump almost 7 basis points

* Supply, respite in North Korea jitters weigh

* Austria launches sale of 100-year bond

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

By Dhara Ranasinghe

LONDON, Sept 12 (Reuters) - Germany’s benchmark 10-year bond yield rose sharply on Tuesday and was set for its biggest daily rise since early July as a sell-off in global bond markets gathered pace.

Hefty bond supply from across the bloc was seen as the main culprit for the selling in euro zone bonds. Austria launched the sale of a 100-year bond, while the Netherlands and Germany issued new debt.

Safe-haven debt such as Germany’s meanwhile faced pressure from a respite in North Korea tensions.

Lingering concerns about potential tapering in the European Central Bank’s bond-buying stimulus also cast a shadow over bond markets after a report on Friday that rate-setters agreed last week to start reducing the bond purchases, with a decision likely at their next policy meeting on Oct. 26.

The ECB’s unconventional policy tools have successfully fought of the threat of deflation and will eventually raise inflation back to target, ECB Vice President Vitor Constancio said on Tuesday.

“The market has been weakened by the ECB leak we had on Friday as the options discussed were a bit more hawkish than expected,” said Cyril Regnat, fixed income strategist at Natixis.

“The bond market started the week on a bad foot and that has continued, although I think it’s mostly supply driven today.”

Across the single-currency bloc, bond yields were 3-7 basis points higher on the day.

Germany’s 10-year bond yield rose almost 7 bps to 0.40 percent, its highest level in around 1-1/2 weeks.

It was on track for its biggest daily rise since early July.

Austria launched the sale of a 100-year bond after overwhelming investor interest gave its debt officials confidence it could become the first euro zone country to sell a “century” bond publicly through a group of banks.

The Netherlands sold 2.2 billion euros of 10-year government bonds and Germany auctioned inflation-linked debt.

Investors often push bond yields higher ahead of an auction to make way for new supply. More bond sales follow on Wednesday, with Germany to sell 10-year debt.

In the U.S., long-dated Treasury yields hit two-week highs, rising for a third straight session amid a respite in geopolitical tensions in North Korea, with investors bracing for a 10-year note auction later in the session.

Britain’s 10-year gilt meanwhile shot up 10 bps to 1.145 percent after data showed British inflation hit its joint highest in more than five years in August, adding to selling pressure in euro zone bond markets.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets

Reporting by Dhara Ranasinghe; Editing by Keith Weir

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