German yield falls below zero as Greece prepares austerity vote

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.

Page 1 of 2 >>

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome