Germany’s 30-year government bonds advanced for a fifth day, reducing the extra yield they offer over shorter maturities, known as flattening the yield curve, as the nation prepared to auction debt due in July 2044 on Wednesday.
German bonds rose as European stocks declined with sliding oil prices prompting investors’ demand for safer assets. With the average yield on German sovereign securities below zero, bonds with longer maturities are attracting investors before the European Central Bank’s meeting on March 10, where policy makers may unveil fresh stimulus measures after negative interest rates and 60 billion euros a month of debt purchases have so far proved insufficient to boost inflation.
The extra yield, or spread, that investors get for holding Germany’s 30-year bonds instead of two-year notes, narrowed to the lowest since June before the nation sells 1 billion euros so-called “off-the-run” securities, or older non-benchmark bonds which tend to be less frequently traded.
Wednesday’s offering will be the first auction of an off-the-run bund, Germany’s debt agency said in an e-mailed reply to a question. Analysts have said sales of off-the-run bonds may aid liquidity by expanding the universe of securities available to investors at a time when central banks are mopping up more of the available supply through quantitative easing.
“Safe-haven flows, ongoing expectations of ECB easing and continued jitters about the global economy are keeping bunds underpinned,” said Nick Stamenkovic, a fixed-income strategist at Edinburgh-based broker RIA Capital Markets Ltd. “Overall expectations for further ECB easing will support bunds. In that environment, investors may be stretched further down the curve, supporting the longer end.”
German 30-year bund yields fell five basis points, or 0.05 percentage point, to 0.81 percent as of 10:14 a.m. London time. The 2.5 percent security due in August 2046 rose 1.80, or 18 euros per 1,000-euro face amount, to 145.455. The yield dropped 12 basis points in the previous four days. It reached 0.80 percent on Feb. 11, the lowest since April 30.