Europe’s Debt Investors Lap Up $19 Billion at Record-Low Yields
(Bloomberg) — Borrowing costs for European governments tumbled to all-time lows in $19 billion of debt auctions across the continent on Wednesday as central-bank stimulus and the risk of deflation bolstered investor demand.
Such was the appetite that Sweden was able to sell bonds with a yield below zero for the first time. On German notes the rate was so negative it was even more punitive than the European Central Bank’s 0.2 percent charge on overnight deposits.
“The ability for capital institutes to sell large quantities at low yields is an indication that investors are desperate for yield,” said Ciaran O’Hagan, head of European rates strategy at Societe Generale SA in Paris. “With the notable exception of the U.S., central banks are giving strong support and that is helping yields fall.”
Rates on euro-area securities are sliding as investors await the start of the ECB’s sovereign-bond buying program in March. That’s spilling over into demand for debt of neighboring nations that may offer relatively higher yields. That helped the Czech Republic, Switzerland and the U.K. join Portugal and Italy with record-low interest rates on debt sold today.
Germany, the euro area’s benchmark for sovereign debt, sold 5 billion euros ($5.7 billion) of notes due in March 2017 at a record-low average yield of minus 0.22 percent. A negative yield means investors buying the securities will get less back when the debt matures than they paid.