Friday 29 Mar 2024
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EDINBURGH (Apr 3): Euro-area sovereign bonds rose this week as the European Central Bank’s quantitative-easing program enabled the region’s governments to raise funds at record-low costs.

France became the latest beneficiary on Thursday, selling 10- and 30-year bonds at record-low yields, with the debt agency saying this week it’s calibrating issuance to match investor demand. The Bloomberg Eurozone Sovereign Bond Index climbed 0.4 percent this week through Wednesday. The gauge gained 1.2 percent in March, capping a winning streak dating back to the start of 2014. Greece’s three-year notes fell as Prime Minister Alexis Tsipras struggled to secure a financial bailout to stay in the euro.

Economic reports showing signs of a recovery in the region did little to halt a bond rally that’s been fueled by a ECB debt-purchase program that has seen it settle 41.02 billion euros ($44.6 billion) since purchases started on March 9. The central bank intends to buy 60 billion euros of securities a month until at least September 2016 as it seeks to boost output and consumer-price growth.

“QE is driving yields lower across the board because there is more demand than supply by far and this could persist,” said Patrick Jacq, a senior fixed-income strategist at BNP Paribas SA in Paris. “There is a strong imbalance” in favor of issuers, he said.

French Yields

French 10-year yields dropped two basis points, or 0.02 percentage point, this week to 0.49 percent at 5 p.m. in London on Thursday. The 0.5 percent bond due in May 2025 gained 0.16, or 1.60 euros per 1,000-euro face amount, to 100.15.

The yield on German 10-year bunds, the euro area’s benchmark sovereign securities, declined one basis point in the week to 0.19 percent, having touched a record-low 0.151 percent on Wednesday. Greek three-year yields rose 330 basis points to 23.87 percent.

France’s record-breaking offerings followed an auction of German five-year notes on Wednesday that yielded minus 0.1 percent, meaning buyers who hold the debt to maturity will receive less back through 2020 than they paid for the securities. Italy sold 10-year bonds at an unprecedented yield of 1.34 percent on Monday.

Euro-area government bonds outperformed their U.K. counterparts, which swung between gains and losses as investors weighed improving economic data with signs that there would be no clear winner in Britain’s May 7 general election.

The U.K. 10-year gilt yield climbed five basis points to 1.59 percent, posting a second week of increases.

 

 

 

 

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