Rates on German short-term notes back in positive territory

11th February 2013, Comments 0 comments

Interest rates on Germany's six-month debt were back in positive territory for the first time since June, the country's central bank or Bundesbank announced on Monday.

The yield, or rate of return, at the auction of six-month debt of so-called "Bubills" was 0.0203 percent, compared with minus 0.0091 percent at the previous auction at the beginning of January, said the Bundesbank, which organised the sale.

Germany sold 3.385 billion euros' ($4.5 billion) worth of the six-month paper but received 6.575 billion euros' worth of bids, a sign of strong demand.

Since the middle of last year, yields on Bubills and other German bonds of varying maturities have been negative, meaning investors are actually paying to lend Germany money as they are afraid of parking it elsewhere amid continued eurozone market turmoil.

As bond market players fleed debt-wracked countries such as Italy and Spain, fearing they may never be repaid, they ploughed money into core eurozone nations such as France and Germany, seen as safer investments.

But financial market tensions have eased noticeably so far this year and yields have fallen for vulnerable countries, while German yields have risen again.

A negative return on a government debt instrument occurs when all the factors in the life of the bond, including the redemption terms compared to the issue terms, are taken into account.

© 2013 AFP

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