Global bonds climb on Deutsche Bank woes

Lender’s shares plummet 3% as yields across Europe fall with investors making a beeline for safety

Bonds gained around the world as renewed concern about Europe’s banking sector sparked demand for the safest assets.

Germany’s 10-year bond yield fell to the lowest since July, Spain’s dropped to a record and Finland’s dipped below zero for the first time, while in the US Treasuries reversed earlier losses. European stocks slipped and Deutsche Bank AG shares tumbled to a record amid investor concern about its capital buffers.

Deutsche Bank shares fell more than 3 per cent to hit a record low of ₣10.18 yesterday.

Markets in Europe were further roiled as sources said the US Justice Department is assessing how big a criminal fine it can extract from Volkswagen AG over emissions-cheating without putting the German carmaker out of business.

At the same time the US also is trying to settle a civil case with Deutsche Bank, the European nation’s biggest lender.

That’s driving investors toward fixed-income assets which are already being buoyed bets central banks will extend or maintain easy monetary policy.

Concerns

“We have concerns about the banking sector again,” said Daniel Lenz, a market strategist at DZ Bank AG in Frankfurt. “Uncertainties surrounding this may actually also cause some safe-haven flows.”

The yield on German 10year bonds fell two basis points, or 0.02 percentage point, to minus 0.14 per cent as of 11.15am London time, and earlier touched minus 0.15 per cent, the lowest since July 11.

The zero per cent security due in August 2026 gained 0.228, or €2.28 per €1,000 ($1,125) face amount, to 101.378. Spanish 10-year yields declined to an all-time low of 0.888 per cent, and Finland’s skidded to minus 0.029 per cent, below zero for the first time on record.