German yield falls below zero as Greece prepares austerity vote

Euro Sentiment

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.

Bloomberg News

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