Markets

Federal bonds are under selling pressure

DBunds have come under selling pressure in the wake of the stock market rally. Prices are falling, which is associated with rising yields on the bond market. The yield on the trend-setting ten-year federal bond on Friday was minus 0.299 percent, significantly above the level of the previous week of minus 0.45 percent. That is the highest level in two months.

Commerzbank analyst Cem Keltek believes a further increase in yield is possible. In his view, federal bonds continue to suffer from supply pressure, which has increased again as a result of the German stimulus package. “If the risk sentiment does not deteriorate significantly, the ten-year return could reach minus 0.25 percent, although the curve should tend to become steeper,” he wrote in his weekly outlook.

The yield on the 30-year federal bond has also risen significantly. It has been in positive territory again since the middle of last week. On Friday, it peaked near 0.25 percent. The increase in the purchase program of the European Central Bank (ECB) by EUR 600 billion to EUR 1.35 trillion has been rather burdensome for federal bonds, while Italian government bonds have clearly gained.

Good for Italy

The ten-year yield was 1.415 percent on Friday. The interest rate differential compared to the federal bond was 1.7 percentage points. It had noticeably decreased in the run-up to the ECB’s decision to increase the purchase program. On Thursday alone, the day of the Governing Council meeting, the so-called “spread”, as Italy’s risk premium is called on the financial markets, narrowed by 0.16 percentage points.

Birgit Henseler, analyst at DZ Bank, attributes the development on the market for government bonds – on the one hand Bunds under pressure, on the other hand increasing demand for debt securities from countries with high sovereign debt – to the support of the central bank: “With the ECB in Bonds from other euro countries seem much more attractive. ”

ECB President Christine Lagarde has fired another bazooka by almost doubling the buying program, said Gregory Perdon, co-head of private bank Arbuthnot Latham. “This is great support for Italy.” The euro also benefited and rose 0.4 percent to $ 1.1383, reaching its highest level since March 10.

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