Germany’s 10-year bonds slump as growth picks up in euro zone

Germany’s 10-year bonds slumped on Wednesday, with the yield breaching 1 per cent for the first time since September, on a combination of new supply and a brightening economic outlook.

The yield on Europe’s benchmark sovereign securities, which was approaching zero only two months ago, continued upward as the nation allotted €4.05 billion of notes due in June 2017.

Ireland, Italy, Spain are scheduled to sell debt on Thursday.

Data tomorrow will show industrial output in the currency bloc rebounded in April, according to a Bloomberg survey of analysts.

“Everyone is aware of the avalanche of issuance tomorrow,” said Martin van Vliet, a senior interest-rate strategist at ING Groep in Amsterdam on Wednesday. “If you look at the more fundamental drivers, there has been a reassessment on the part of many investors.

“Indeed, inflation is building in the euro zone, growth is picking up and strengthening.”

German 10-year bund yields rose three basis points, or 0.03 percentage point, to 0.98 per cent as of 5 pm, after earlier touching 1.06 per cent, the highest level since September 19th.

Investor sentiment toward bunds has soured as inflation returned to the euro area, which suggested that the European Central Bank’s asset-purchase programme was beginning to avert deflation. The selloff picked up, with other data showing the economy was recovering.

– (Bloomberg)