German bonds in demand as safe-haven investment

16th March 2011, Comments 0 comments

Germany reported strong demand Wednesday for two-year bonds that represent a safe-haven investment amid uncertainty on global financial markets.

The central bank said offers worth a total of 9.375 billion euros ($13.08 billion) were received in response to an offer of up to six billion euros in so-called Schatz instruments that paid an interest rate of 1.53 percent.

In the end the German agency that manages debt operations took in 4.9 billion euros, as it often does before topping up the required amount on secondary debt markets.

Analysts at Helaba bank noted "a clear flight to security that benefits assets like Swiss francs on foreign exchange markets and German bonds and US Treasury bills on debt markets."

Investors are worried about the extent of the crisis at the Fukushima nuclear power station in Japan, unrest in the Middle East and a sharp downgrade of Portugal's debt on Tuesday.

Some have begun to question whether the European Central Bank will go ahead with a rate hike in early April as markets have come to expect since ECB president Jean-Claude mooted the possibility early this month.

© 2011 AFP

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