By Harry Robertson <\/p>\n
LONDON, Aug 21 (Reuters) – Germany and the broader euro zone are selling record amounts of bonds, adding to the pressures driving European bond yields to multi-year highs as the continent continues to borrow heavily amid crises ranging from \u200cCOVID-19 to the Iran war. <\/p>\n
Germany’s 30-year government bond yield hit its highest since 2011 at 3.79% on Wednesday, with inflation \u200cfears tied to the Iran war adding to the selloff. The euro zone’s benchmark issuer sold a bond at that maturity a day earlier with the highest yield in \u200b15 years. <\/p>\n
French yields are near their highest levels in 18 years, not far off 5%. Yields move inversely to prices. <\/p>\n
Higher yields mean governments pay more to borrow, and they raise mortgage and corporate borrowing costs, potentially slowing economies. <\/p>\n
It’s a challenging backdrop as governments and companies look to sell bonds again after the usual summer lull. In the longer term, there are also few signs that bond sales will slow. <\/p>\n
Commerzbank estimates that German government bond supply \u200cwill hit a record high in 2027 of \u20ac400 billion ($468 \u2060billion) in gross terms, up from \u20ac349 billion this year. <\/p>\n
“We’re talking about a general situation where there’s a lot of money that needs to be raised in bond markets, and yields are adjusting to reflect that,” said Ales \u2060Koutny, head of international rates at $12 trillion asset manager Vanguard. <\/p>\n
Germany on Wednesday saw soft demand for a 10-year bond sale, selling \u20ac3.8 billion versus guidance of \u20ac6 billion. <\/p>\n
“We have post-summer supply coming back,” said ING senior rates strategist Benjamin Schroeder, who added that Germany announced its 30-year bond syndication earlier than many in \u200bthe market \u200bhad anticipated. “So this adds a bit to the upward pressure on yields.” <\/p>\n
In a \u200btectonic shift, Berlin is casting off years of stringent \u200cborrowing rules and ramping up spending on defence and infrastructure to revive the flagging economy. <\/p>\n
The German finance ministry told Reuters that the high levels of borrowing and rising yields reflect a “massive investment in security and defence” required after Russia’s invasion of Ukraine. <\/p>\n
EURO ZONE KEEPS SPENDING <\/p>\n
Across the euro zone, governments continue to borrow heavily to support their economies after the COVID-19 and Ukraine crises, fund rising welfare and health bills as populations age, boost defence spending and grapple with increasingly volatile weather. <\/p>\n
Barclays estimated in July that gross euro zone bond supply will hit a new record of \u20ac1.54 \u200ctrillion next year, though it flagged significant spending uncertainties. <\/p>\n
Net issuance, which takes into \u200baccount maturing debt which investors typically recycle into bonds, is set to be slightly \u200blower than in 2026 at \u20ac574 billion. <\/p>\n
Barclays said France will face \u200bclose scrutiny, with its deficit set to stay above 5% as its politicians struggle to agree on budgetary measures. <\/p>\n
The \u200cEuropean Central Bank is letting its bond holdings mature without \u200breinvesting the proceeds as it shrinks \u200bits balance sheet, adding to the debt private investors must absorb. <\/p>\n
“Market yields to some extent are reacting to that because if there’s more paper to offer and an unchanged willingness or appetite of investors to accept that paper, you need a higher price,” \u200bsaid Michael Weidner, co-head of global fixed income \u200cat Lazard Asset Management, about the rise in government and corporate bond issuance more broadly. <\/p>\n
“We’re somewhat hesitant regarding buying into \u200bthe very long end,” he said. “We’ve bought into 10s (10-year bonds),” he said, adding that German 10-year bond yields around 3.27% \u200bwere attractive. <\/p>\n
(Reporting by Harry Robertson; editing by Dhara Ranasinghe and Hugh Lawson) <\/p>\n","protected":false},"excerpt":{"rendered":"By Harry Robertson LONDON, Aug 21 (Reuters) – Germany and the broader euro zone are selling record amounts…\n","protected":false},"author":2,"featured_media":76318,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[21561,5],"class_list":["post-76317","post","type-post","status-publish","format-standard","has-post-thumbnail","category-germany","tag-bonds","tag-germany"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/posts\/76317","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/comments?post=76317"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/posts\/76317\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/media\/76318"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/media?parent=76317"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/categories?post=76317"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/tags?post=76317"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}