UPDATE 1-German 2-yr yields hit one-month low as euro zone services sector stalls
*France due to auction long-dated debt. With oil prices dropping 2% on Wednesday and weak retail sales from Germany and private payrolls data from the United States undershooting expectations, investors retreated to the safety of government bonds. “It’s a weird situation where we see equities continue to perform at all-time highs, but we also have the…
* German 2-year yields hit lowest since August 8
* Euro zone PMI shows services industry growth slowing
* France due to auction long-dated debt
* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr(Adds French auction results, updates prices)
By Abhinav Ramnarayan
LONDON, Sept 3 (Reuters) – Short-dated German bond yieldsdropped to their lowest level in nearly a month on Thursday as asurvey showed the euro zone’s rebound from its deepest downturnon record faltered in August.
Growth in the bloc’s dominant service industry almost groundto a halt, suggesting the long road to recovery will be bumpy.
With oil prices dropping 2% on Wednesday and weakretail sales from Germany and private payrolls data from theUnited States undershooting expectations, investors retreated tothe safety of government bonds.
“It’s a weird situation where we see equities continue toperform at all-time highs, but we also have the unresolvedCOVID-19 situation fuelling demand for government bonds,” saidDZ Bank rates strategist Christian Lenk.
“Concern over Covid-19 and support from central banks arealso keeping yields low,” he added.
Germany’s two-year bond yield dropped three basispoints to -0.718%, its lowest level since Aug. 8, in earlytrades while longer-dated 10-year and 30-year Bund yields hitone-week lows.,
As of 1045 GMT, most euro zone bond yields across thespectrum were unchanged or slightly lower in what was a quietday after Wednesday’s drop in yields.
French yields remained flat after a strong set of auctionssaw the country’s debt agency raise 10.5 billion euros in anauction that included 30-year and 40-year bonds. While demandfor the short-dated portion was particularly strong, the numberof bids that came in for the longer-dated debt was also healthy.
With Germany recording strong demand for its inaugural10-year Green bond on Wednesday, appetite for government debtappears extremely strong at the moment.
Final readings of IHS Markit’s purchasing managers’ indexes(PMI) for the services sectors of France and Germany also showeda slight easing of the recovery.
France said on Thursday it plans to spend 100 billion euros($118 billion) to pull its economy out of the slump. Thestimulus equates to 4% of gross domestic product, meaning Franceis ploughing more public cash into its economy than any otherbig European country as a percentage of GDP.(Reporting by Abhinav Ramnarayan; Editing by Toby Chopra andHugh Lawson)
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