Germany Sells 2-Year Debt at Negative Yield
ECB's Accomodative Measures Have Driven Down Europe's Yields
Sept. 17, 2014 6:55 a.m. ET
FRANKFURT—Investors paid a hefty price for
the privilege of buying German government debt Wednesday, in a fresh
sign of how the European Central Bank's monetary policies are upending
the region's bond markets.
The German
Finance Agency sold €3.341 billion ($4.33 billion) of a two-year
treasury note at a record low average yield of -0.07%, the Bundesbank
said. That effectively means investors are paying to loan money to the
government. It is the first time Germany has sold two-year debt at a
negative yield since December 2012. At its previous similar sale in
August, the country sold two-year debt at a 0% yield.
In
the post-issue secondary market, German two-year debt has offered
yields below zero for more than a month. Bond yields fall as prices
rise.
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"Negative auction yields even in the
two- to three-year part of the German curve are a good illustration of
the current depressed interest-rate environment," said
Jan von Gerich,
chief strategist at Nordea. The decline in yields is likely to
continue as the full range of ECB easing measures emerges over time, he
added. Bond yields drop when prices rise.
Earlier this week, Denmark, a neighbor of the eurozone whose monetary policy broadly tracks that of the ECB, also sold two-year bonds with a negative yield, for the first time in more than two years.
The
ECB cut benchmark interest rates on Sept. 4 and announced plans to buy
certain types of nongovernment bonds. That has boosted prices of all
categories of bonds in the region.
"It
seems highly unlikely, given the growth and inflation outlook, that the
ECB will unwind these accommodative measures anytime soon," said
Morgan Stanley
MS +1.28%
analyst
Anton Heese,
adding that the ECB's measures have "firmly" pinned down bond yields.
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