German bonds fall as UK political clarity reduces haven demand

Bloomberg

German government bonds fell for a second day as greater political clarity in the U.K. and the prospect of a boost to monetary stimulus globally supported stocks and reduced demand for the safest assets.
Yields on the nation’s 10-year bunds, the euro zone’s benchmark government securities, climbed to the highest in a more than a week — days after touching a record low. British Home Secretary Theresa May’s imminent accession as prime minister eased the political stresses felt in the country since the June 23 Brexit vote. And speculation is growing that not only the Bank of England, but also Japan and the European Central Bank, are preparing fresh injections of stimulus to stoke their economies.
“It’s a combination of factors that’s keeping the market comforted right now,” said Orlando Green, a rates strategist at Credit Agricole SA’s corporate and investment-banking unit in London. “You have a bit more certainty on the U.K. political front. You have decent risk sentiment from overnight, with the talk of stimulus in Japan. The market suspects that policy makers are on-side to try and shore up confidence.”
Germany’s 10-year bund yield rose five basis points, or 0.05 percentage point, to minus 0.12 percent as of 9:57 a.m. London time. That’s up from a record-low of minus 0.205 percent set on July 6. The 0.5 percent security due in February 2026 fell 0.465, or 4.65 euros per 1,000-euro ($1,111) face amount, to 106.
Yields on similar-maturity French bonds climbed four basis points to 0.16 percent, while Spanish yields were little changed at 1.16 percent and Italy’s were at 1.21 percent.
“There’s still a relatively positive outlook compared to last week, which was very much the reverse,” Green said.