Germany's short-term debt fetched negative yields at an auction on Monday as investors effectively paid to lend money to the government in their scramble to safe-havens. On the other hand, Italy saw its borrowing costs rise due to concerns over the fiscal situation of the country.
According to Bundesbank data, Germany sold EUR 3.770 billion of its 6-month Bubill against a target of EUR 4 billion. The sale attracted bids totaling EUR 4.745 billion.
The yield on the debt due February 2013 was -0.0499 percent versus -0.0344 percent at the previous sale on July 9. The bid-to-cover ratio, which reflects demand, fell to 1.30 from 1.70.
Elsewhere today, Italy placed EUR 8 billion of its 12-month treasury bills known as BoTs, meeting the target set for the sale. The sale drew bids totaling EUR 13.545 billion, the treasury said.
The yield on the Italian debt rose to 2.767 percent from the 2.697 percent paid on July 12. Demand was 1.69 times the offer versus 1.55 times at the previous sale.
The European Central Bank has indicated its readiness to resume government bond purchases if the economic situation deteriorates further. After the August meeting, ECB President Mario Draghi said the policymakers "will consider undertaking further non-standard measures" if conditions deteriorate.
Eurostat is set to release second quarter GDP figure for the euro area tomorrow. Economists expect a 0.2 percent contraction in the gross domestic product in the second quarter after the region's narrow escape from a technical recession in the previous three months.
Germany's Federal Statistical Office is also scheduled to publish second quarter GDP figures. The largest Eurozone economy is seen expanding 0.2 percent in the second quarter, with the growth rate decelerating from the 0.5 percent recorded in the first quarter.
According to preliminary official estimates released recently, Spain and Italy, which have been struggling with rising borrowing costs, suffered deeper recessions in the second quarter with the poor economic performance aggravating their fiscal woes.
Spain's GDP sank 0.4 percent in the second quarter of 2012 after a 0.3 percent decline each in the previous three months and in the fourth quarter of 2011. Italy's GDP dropped 0.7 percent sequentially, following a 0.8 percent decline in the previous quarter.
by RTT Staff Writer
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