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A Growing Recession Spurs Investors to Buy German Bunds for Safety

“Germany’s 10-year bonds advanced, snapping two days of declines, as economic reports added to signs the recession in the 17-nation region is deepening.

French, Dutch and Austrian securities also gained as European stocks declined, boosting demand for the region’s safer fixed-income assets. Gross domestic product in the euro area fell 0.2 percent in the first quarter, while separate reports showed retail sales in the region fell in April and services shrank last month. The European Central Bank will keep its main interest rateat a record-low 0.5 percent tomorrow, a Bloomberg News survey of economists shows.

“The data today looked dreadful,” said Soeren Moerch, head of fixed-income trading at Danske Bank A/S (DANSKE) in Copenhagen. “The ECB will probably not move tomorrow, but I would not be surprised if its rhetoric would turn a bit more dovish than last time. Europe has no growth. Stock losses also helped bunds.”

The 10-year bund yield dropped three basis points, or 0.03 percentage point, to 1.51 percent at 1:28 p.m. London time after climbing to 1.57 percent on June 3, the highest since Feb. 25. The 1.5 percent security maturing in May 2023 rose 0.28, or 2.80 euros per 1,000-euro ($1,309) face amount, to 99.89.

Euro-area GDP (EUGNEMUQ) fell 0.2 percent, the European Union’s statistics office in Luxembourg said today, confirming an estimate on May 15. A composite index based on a survey of purchasing managers in services and manufacturing industries in the region was at 47.7 last month, in line with an initial estimate on May 23, London-based Markit Economics said.

Yields Fall…”

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