German government bonds rose, pushing two-year note yields below zero for the first time in two months, as Greece prepared for a vote as soon as this week on austerity measures needed to keep the nation in the euro.
Ten-year bund yields fell to the lowest level in more than five weeks as Greek Prime Minister Antonis Samaras sought political support for the budget plans. Spanish securities fell for a second day before the country sells bonds on Nov. 8. Germany’s Sentix research institute said investor confidence in the euro-area economy improved this month.
“The market is clearly in a more negative sentiment and we can see Spanish yields creeping higher again,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen. On Greece “we are now approaching a more decisive phase again and investors will look for safety until we get past those hurdles,” he said.
Germany’s two-year yield slipped less than one basis point, or 0.01 percentage point, to zero percent at 1:36 p.m. London time, and reached minus 0.014 percent, turning negative for the first time since Sept. 6. The zero percent note due September 2014 rose 0.01, or 10 euro cents per 1,000-euro ($1,277) face amount, to 100.
A negative yield means investors who hold the security until it matures will receive less than they paid to buy it.
Samaras Pledge
Germany’s 10-year yields fell two basis points to 1.43 percent, after touching 1.42 percent, the lowest since Sept. 28.
Samaras pledged yesterday the raft of wage and pension cuts in the latest austerity package will be the last and Greek society won’t tolerate any more, according to comments made to lawmakers of his New Democracy party. The first parliamentary vote in Athens may come as early as Nov. 7.
Politicians in Greece’s coalition government are debating debt-reduction measures demanded by the European Union as the country seeks a 31 billion-euro financing tranche this month, part of a 130 billion-euro bailout.
The yield on Greece’s 2 percent securities maturing February 2023 fell nine basis points to 18.10 percent, after jumping 90 basis points last week.
Bunds were little changed relative to their U.S. Treasury counterparts before American voters choose between President Barack Obama and challenger Mitt Romney in tomorrow’s election.
German 10-year bonds yielded 25 basis points less than Treasury notes with a similar maturity. The spread has widened from 20 basis points two weeks ago.
Sentix said its index measuring sentiment in the 17-nation currency bloc increased to minus 18.8 from minus 22.2 in October. The median prediction of 11 economists in a Bloomberg News survey was minus 21.
Economic confidence in the euro area fell for an eighth month to the lowest in more than three years in October, the European Commission in Brussels said Oct. 30. The European Central Bank will give its latest interest-rate decision on Nov. 8. Reports tomorrow will show that manufacturing and services industries in the region contracted last month, according to Bloomberg surveys of economists.
“There doesn’t seem to be any kind of pickup in the economic momentum and that’s also hitting Germany stronger than it was previously and if we have to assume that policy will remain loose, it explains why bund yields” are falling, said Michael Markovich, head of global interest-rates research at Credit Suisse Group AG in Zurich. “We continue to have these questions” about Greece and Spain, he said.
Spanish Jobless
Spain’s 10-year yield climbed 10 basis points to 5.76 percent, the highest since Oct. 17, and adding to last week’s increase of seven basis points.
Spanish registered unemployment rose the most in nine months in October, pushing the economy deeper into a five-year slump, a report by the Labor Ministry in Madrid showed today. Prime Minister Mariano Rajoy is resisting pressure to seek a second European bailout.
Volatility on Austrian bonds was the highest in euro-region markets today, followed by those of Germany, according to measures of 10-year or equivalent-maturity debt, the spread between two-and 10-year securities, and credit default swaps.
The yield on the Austrian 10-year bond was two basis points lower at 1.94 percent, after touching 1.93 percent, the lowest level since Oct. 15.
The Netherlands sold 1.17 billion euros of bills due in May at a negative yield of minus 0.012 percent. France is also scheduled to sell bills today, while Spain will auction as much as 4.5 billion euros of notes and bonds due between 2015 and 2032 on Nov. 8.
German bonds have returned 3.5 percent this year through Nov. 2, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish securities gained 3 percent and Italy’s earned 17 percent.
