Euro zone government bond yields edge up, auctions in focus
Plans for hefty German stimulus have boosted expectations for increased bond sales, with German 30-year yields up 44 bps so far this year. (EPA Images pic)
LONDON : European government bond yields edged up today with a focus on bond sales from Germany and Spain later in the day, just as a weak Japanese government bond auction sparked a selloff in Japan's bond market that rippled out.
Germany, the euro zone's benchmark bond issuer, plans to sell €2 billion of 15-year bonds and Spain is expected to sell a 10-year bond via a syndicate of banks.
Signs of weak demand at bond sales in Japan and the US over the past week have returned the market's focus to high debt levels in major economies, putting upward pressure on bond yields, especially those on long-dated bonds.
Long-dated Japanese government bond yields rose sharply after demand at a closely watched 40-year bond auction today dropped to its lowest level since July.
That set the tone for other big debt markets, with Germany's benchmark 10-year bond yield up around 1.5 basis points at 2.54% in early trade and 30-year yields around 2 bps higher at 3.04%.
When a bond's yield rises, its price falls.
'I would say that there is a global shift, that things are happening in Japan, things are happening in the US.
'Things are still happening in Germany,' said Nordea chief market strategist Jan von Gerich, referring to high debt levels and expectations for increased bond supply.
'If we look at the repricing that we've seen in Europe, that has mainly centred on German bonds,' he added.
Plans for hefty German stimulus have boosted expectations for increased bond sales, with German 30-year yields up 44 bps so far this year.
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