Germany sold its 30-year debt at a record-low yield at an auction on Wednesday, in a sign that the safe haven demand has recovered.
The safe haven appeal of German debt suffered a blow after Moody's downgraded the outlook of the triple A rated sovereign to 'negative' from 'stable' late Monday, pushing the country's 10-year yield higher yesterday.
The country raised EUR 2.322 billion from the sale of its 2.50 percent July 2044 Federal Bonds or Bunds against a target of EUR 3 billion, Bundesbank said. The auction drew bids totaling EUR 3.367 billion. An amount of EUR 678 million was set aside for secondary market operations.
The yield fell to a record-low 2.17 percent from 2.41 percent paid in the previous sale on April 25. The bid-to-cover ratio, which reflects investor demand, rose to 1.5 from 1.1 in April.
Germany also sold 0.10 percent April 2023 inflation-linked bonds today. The sale raised EUR 752 million against a target of EUR 1 billion and bids totaling EUR 1.422 billion. The yield on the linker was a negative 0.39 percent and the cover ratio was 1.9.
Data released today gave signaled worries over the German economic outlook. The Ifo Institute's business confidence index dropped for the third straight month to its lowest level in more than two years. Heightened tensions surrounding the debt crisis weighed on business expectations, more notably in the manufacturing sector.
The latest purchasing managers' survey by Markit Economics revealed Tuesday that the private sector contracted in July, marking the weakest performance since June 2009. Both services and manufacturing activity declined during the month.
by RTT Staff Writer
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