ECONOMY

German 10-year bunds rise as Greece debt-aid talks stall

German 10-year bunds rose, snapping a two-day decline, after European finance ministers meeting in Brussels failed to agree on a debt-reduction package for Greece.

Benchmark yields dropped from the highest level in two weeks before Germany auctions four billion euros ($5.1 billion) of the 10-year securities today. Spanish and Italian bonds fell as EU finance chiefs said they were unable to raise enough funding from other sources, including the International Monetary Fund, to help alleviate Greece’s debt burden. Portugal is due to sell as much as 2 billion euros of bills.

German 10-year yields fell two basis points, or 0.02 percentage point, to 1.40 percent at 7:32 a.m. London time. The rate rose to 1.42 percent yesterday, the highest since Nov. 7. The 1.5 percent bond maturing in September 2022 rose 0.175, or 1.75 euros per 1,000-euro face amount, to 100.925.

Finance ministers failed to tackle the dual task of steering an extra 32.6 billion euros to Greece through 2016 while finding a way to tame the resulting increase in the nation’s debt, already the highest in Europe and deemed “unsustainable” by the IMF.

Spanish 10-year yields climbed two basis points to 5.81 percent. The rate on similar-maturity Italian debt rose three basis points, to 4.88 percent.

Germany last sold 10-year securities on Oct. 24 at an average yield of 1.56 percent, compared with a record-low auction yield of 1.31 percent on July 11. The nation is also scheduled to auction 1 billion euros of inflation-linked bonds maturing in 2018.

German bonds returned 3.6 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Italian securities gained 18 percent, and Spanish debt earned 2.5 percent.

[Bloomberg]