UPDATE 1-German yields hit two-month high, Austria sees record demand for debt selling
(Add details, update prices)
By Yoruk Bahceli
September 16 (Reuters) – Germany’s 10-year yield hit a new two-month high on Thursday as euro area government debt issuance resumed.
Austria was set to raise € 5 billion ($ 5.9 billion) from a new 15-year bond upon syndication, of which it will keep € 500 million, according to a note from the senior manager consulted by Reuters.
The deal received a record demand of € 42 billion, said Christian Schreckeis, head of issuance and portfolio management, investor relations and the federal budget at the Austrian financial agency.
During auctions, Spain raised 5.19 billion euros in bonds maturing in 2024, 2026 and 2031.
France raised 9 billion euros in bonds due 2024, 2026 and 2027 and an additional 1.86 billion euros from inflation-linked bonds due 2026, 2031 and 2040.
The German 10-year yield, the benchmark for the block, hit a two-month high of -0.293% early in the session and was unchanged at 1147 GMT at -0.31%.
Michael Leister, head of interest rate strategy at Commerzbank, said the large supply could wreak havoc on German bonds, which accelerated their underperformance against US Treasuries this week.
The spread between German and US 10-year yields narrowed by six basis points this week, putting German bonds on track for their biggest weekly underperformance against US Treasuries since mid -June.
Lyn Graham-Taylor, strategist at Rabobank, saw the main driver behind the eurozone bond delay in the bloc’s soaring and Germany’s inflation expectations. Bond yields move in the opposite direction to prices.
“Our main view is that you see a little bit of inflationary pressure in the Bund… because the start of (rising inflation expectations) coincided with the SPD leading in the (German election) polls,†he said. he declared, referring to the German Social Democrats.
The focus will also be on the President of the European Central Bank, Christine Lagarde, who is due to speak at 12:00 GMT. The ECB last week decided to slow its purchases of emergency bonds in the event of a pandemic in the fourth quarter, but allayed fears of a potentially more hawkish move.
She will follow Finland’s central bank chief Olli Rehn, who said any exit from the ECB’s stimulus would be “very gradual” and ensure favorable financial conditions are maintained.
A flurry of US data, including retail sales expected at 12:30 GMT, will be another point of interest for bond investors.
Mizuho analysts said Thursday’s US data could provide more clarity on the macroeconomic picture ahead of next week’s US Federal Reserve meeting, which will also be a key event for Eurozone bonds as they move. often in tandem with US Treasuries.
The data follows U.S. inflation figures on Tuesday, which showed consumer prices rose slightly more slowly than expected in August, further evidence of policymakers’ belief that a recent upturn in l inflation is transitory.
($ 1 = 0.8495 euros) (Report by Yoruk Bahceli Editing by Raissa Kasolowsky and Mark Potter)