Germany has sold 10-year debt with a negative yield for the first time since the autumn of 2016, highlighting how the global sovereign debt rally has begun affecting dealings in the primary market.
The government on Wednesday sold €2.4bn in 10-year paper with an average yield of minus 0.05 per cent, according to the German Finance Agency. The agency said it received 2.6-times more bids for the debt than it accepted, in a sign of robust demand.
While shorter-term issuance has previously priced with a negative yield, it was the first time Germany sold Bunds, which have maturities of at least 10 years, with a yield below zero since October 2016.
The negative yield means that investors who bought at Wednesday’s auction and hold to maturity are guaranteed to sustain a loss.
Highly rated government bonds from issuers ranging from Germany, to Britain and the US have rallied heavily since the Federal Reserve last week ditched plans to raise rates this year. The rally accelerated later in the week on the back of gloomy data on Germany, Europe’s powerhouse economy.
In a sign of the rally’s vigour, yield on the broad Bloomberg Barclays global government aggregative index has dropped 0.44 percentage points to 1.17 per cent since a recent peak last October.
