German bond issue undersubscribed: Bundesbank

1st December 2010, Comments 0 comments

A German bond issue on Wednesday was undersubscribed, figures released by the central bank showed, a sign that even benchmark German debt has not been spared by the latest eurozone crisis.

Last week, an issue of 10-year German bonds, which are the eurozone reference, also met with offers for less than was available, amid heightened market tensions stemming from the Irish debt crisis.

This time, the German agency which manages the country's sovereign debt received offers for just 4.55 billion euros (5.96 billion dollars) after tendering five-year bonds worth a total five billion euros, the central bank data showed.

In the end, the agency sold "Bobl" bonds worth 4.13 billion euros at an average rate of 1.73 percent, during the second round of a bond issue first launched on September 22.

Of 70 German bond issues this year, it was only the fifth to be undersubscribed, and the result immediately drove up the rate on 10-year bonds to 2.769 percent from 2.670 percent at the close of trading on Tuesday.

Pressure has grown recently on Greek, Irish, Italian, Portuguese and Spanish government debt, while German bonds, the benchmark for high quality in the eurozone, normally benefit from full investor confidence.

However, the more there is a perception that the strong eurozone countries are, or may in future, shoulder extra risks by financing bailouts, the more the credit standing of the stronger countries may potentially be diluted.

© 2010 AFP

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