Germany’s Bonds Lead Soveriegn Debt Dip in Europe Amid Fed Tapering Bets

Paul Dykewicz

Germany’s Bonds Lead Sovereign Debt Valuation Dip in Europe Amid Fed Tapering Bets (Bloomberg)

Germany’s government bonds led declines in the value of the euro region’s sovereign securities as a U.S. job report raised speculation that the Federal Reserve will taper its asset-purchase program. Germany’s 10-year bund yields climbed to the highest level in six weeks, after euro-area data confirmed the region’s economy expanded for a second quarter, reducing demand for Europe’s benchmark debt. Demand fell as Germany auctioned 3.3 billion euros ($4.5 billion) of five-year notes. Italian 10-year bonds slid for a fourth day — the longest losing streak since July. Investors should sell bunds, along with Treasuries, gilts, gold, the Swiss franc and the yen, as the Fed begins to phase out its asset-purchase stimulus program, said Erik Nielsen, global chief economist for UniCredit SpA in Istanbul. Important economic data will arrive Friday, Dec. 6, when the U.S. Labor Department releases its November jobs report. “Investors are fearing better nonfarm payrolls data on Friday would definitely put Fed tapering back on the agenda,” said Alexander Aldinger, a fixed-income strategist at Commerzbank AG in Frankfurt. “This is broadly the reason why bunds are lower and the periphery is selling off. The European data today is secondary.” Germany’s 10-year yields climbed nine basis points, or 0.09 percentage point, to 1.81 percent at 4:19 p.m. London time to mark th highest level since Oct. 22. The 2 percent bund maturing in August 2023 fell 0.765, or 7.65 euros per 1,000-euro face amount, to 101.67.

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