Yields rise at German medium-term bond auction

Date: Wednesday 04 Jul 2012

Germany issued new five-year bonds on Wednesday morning, raising 3.3bn euros, short of the high-end target of four billion euros.

The German Treasury paid a slightly higher borrowing cost of 0.52% compared to 0.41% in the prior comparable auction.

The auction took place on increased market expectations that the European Central Bank (ECB) will approve a rate cut in Thursday's monetary policy meeting. Meanwhile, the purchasing managers' indices (PMIs) for the services sector released earlier in the day revealed that the Eurozone economy has likely contracted in the second quarter.

Spain will be the next major European economy to tap the sovereign bond markets ahead of the ECB rate decision. It will also be Spain's first auction since last week's European summit. The Spanish Treasury plans on issuing three-year bonds with a coupon rate of 4%, four-year bonds with a coupon rate of 4.25%, and 10-year bonds with a coupon rate of 5.85%.

MD

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