Follow Us

Follow us on Twitter  Follow us on LinkedIn
 

24 November 2011

WSJ: German bond sale spurs worries


Default: Change to:


A German government debt auction drew some of the weakest demand since the introduction of the euro, signalling diminishing investor appetite for even the safest eurozone assets amid Europe's worsening debt crisis.


The German government was able to sell only €3.644 billion of the €6 billion in 10-year bunds on auction for an average yield of 1.98 per cent.

Interest rates on Germany's 10-year bonds rose sharply after the auction to 2.09 per cent, their highest level in three weeks, leapfrogging the yield on the US 10-year note. The structure of German bond issuance also played a role in the auction results. Germany traditionally auctions bonds, rather than operating a syndicate of primary dealers to place them with investors. The Finanzagentur, the government's issuing agent, then gradually feeds the bonds it doesn't sell into the secondary market.

ECB Vice President, Vítor Manuel Ribeiro Constâncio, said the auction had failed "for technical reasons". He noted a crucial distinction with the failed auctions of other countries in recent months, saying "it doesn't raise any concerns about the capacity of Germany to finance itself".

But investors also drew attention to the fact that the auction coincided with the publication of proposals from the European Commission for the joint issuance of bonds by eurozone countries, something that could radically change the dynamics of the entire debt crisis by giving an effective German commitment to underwrite at least a part of the rest of the eurozone's debts.

Full article



© Wall Street Journal


< Next Previous >
Key
 Hover over the blue highlighted text to view the acronym meaning
Hover over these icons for more information



Add new comment