Bond ETFs for Germany

April 11th at 10:09am by John Spence

Germany on Wednesday auctioned 10-year bonds at record-low yields but saw lackluster demand for the debt despite worries over the debt situation in Spain and Italy.

“The average yield came in at 1.77%, the lowest ever at a German 10-year auction,” The Wall Street Journal reported. “This yield means that investors effectively don’t make any real return when holding German paper, given the above 2% inflation rate in Germany.”

“The modest demand is due to the historical low yields, where investors are very reluctant to buy long-dated German bonds at these low levels despite the fiscal slippage we see in Spain and the ongoing crisis in the periphery,” said Jens Peter Sorensen, chief analyst at Danske Markets, in the WSJ.com report.

Exchange traded products that invest in German bonds include PowerShares DB German Bond Futures ETN (NYSE Arca: BUNL), ProShares German Sovereign/Sub-Sovereign ETF (NYSEArca: GGOV) and PIMCO Germany Bond Index Fund ETF (NYSEArca: BUND).

Trading volume in BUNL spiked on Tuesday as yields in Spanish bonds moved higher on renewed fears over the country’s finances. [Spain ETF Falls to Lowest Since March 2009 on Debt Woes]

European stock markets recovered Wednesday following the previous session’s drubbing.

“While safe-haven assets lost their shine, for the time being at least, recently beleaguered Spanish and Italian bonds saw some improvement, with traders citing short covering,” WSJ.com reported. [ProShares Offers German Sovereign Debt ETF]

PowerShares DB German Bond Futures ETN


The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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