Euro area bond yields extend falls as rally continues

BERLIN: German bond yields fell on Tuesday to their lowest since February, pushing the entire German yield curve to the brink of turning negative as investors continued to snap up government bonds.

Ater fears around the Delta variant of the coronavirus and the continuation of position adjustments into bonds pushed both German and US Treasury yields on Monday to their lowest since February on Monday, the rally continued on Tuesday even as stock markets rose on both sides of the Atlantic.

Ater relatively contained moves at the start of the session, bond yields in the euro area fell sharply and that accelerated following the US trading session open as US Treasury yields moved sharply lower.

Germany’s 10- year yield, the benchmark for the euro area fell more than 5 basis points to - 0.44 per cent, the lowest since February.

Two-year yields, which so far had been much more stable than the rest of the yield curve, fell nearly three basis points to -0.725% in their biggest daily fall since June 2020.

The German yield curve as measured by the gap between two and 10-year yields tightened to 27 bps, the narrowest since February, a move reflecting economic uncertainty.

German 30-year yields led the rally, dropping more than six bps to 0.015 per cent. They are approaching sub-zero levels for the first time since February.

A move below zero would push the entire German yield curve into negative territory.