Ger­man bonds a safe haven in Chi­nese slide

Kathimerini English - - Front Page -

Top-rated Ger­man bond yields fell to the low­est level seen in nearly three months yesterday, as fears of a China-led global eco­nomic slow­down saw in­vestors bar­rel out of riskier as­sets like stocks. Oil slumped to new six-and-a-half-year lows as mar­kets fret­ted about shrink­ing de­mand from the world’s sec­ond-largest econ­omy, while the prospect for a weaker Chi­nese cur­rency threat­ens to ex­port dis­in­fla­tion be­yond its borders. Mar­kets are al­ready pric­ing in that the eu­ro­zone could re­turn to de­fla­tion in a year’s time. “What hap­pens in China does have a big ef­fect on the rest of the world,” said Or­lando Green, a strate­gist at Credit Agri­cole. “It is very dif­fi­cult to trade this mar­ket and we could ex­er­cise cau­tion.” The IMF ex­pects the Chi­nese econ­omy to grow at 6.8 per­cent this year, be­low the 7.4 per­cent growth achieved in 2014. But fear­ing the worst, in­vestors took cover in Europe’s bench­mark Ger­man bonds, send­ing 10-year yields down 5 ba­sis points to touch 0.53 per­cent in the early trades, the low­est since June 1. Yields on lower-rated bonds from the bloc’s south­ern pe­riph­ery suf­fered. Greece, Por­tu­gal, Italy and Spain all saw their 10-year yields rise 46 ba­sis points on the day to 9.89 per­cent, 2.70 per­cent, 1.91 per­cent and 2.06 per­cent, re­spec­tively. While the dis­mal out­look for con­sumer price growth looked set to cush­ion the blow as it brings with it calls for the Euro­pean Cen­tral Bank to in­ject more stim­u­lus into the bloc, elec­tions in Greece next month have added more un­cer­tainty into the mix.

Salaries in Greece have dropped by a cu­mu­la­tive 28.16 per­cent since 2010, ac­cord­ing to the wage in­dex data for the first quar­ter of this year pub­lished yesterday by the Hel­lenic Sta­tis­ti­cal Au­thor­ity (ELSTAT). The in­dex showed that sea­son­ally ad­justed wages fell by 1.8 per­cent in Q1 com­pared to Q4 of last year.

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