BLBG: Pound Advances Against Euro After Warning on German Bank Debt
The pound advanced against the euro after Britain’s Telegraph newspaper cited a German banking regulator as saying problem debt at the nation’s biggest lenders may increase.
The U.K. currency stayed higher after a report showed European industrial orders declined for an eighth month in March as the worst recession in more than six decades curtailed demand for machines and equipment. Gilts advanced as the FTSE 100 Index, a benchmark for stocks in Europe’s second-largest economy, fell 1 percent.
“The amount of bad news that’s priced into the pound quite considerably exceeds that priced into the euro,” said Michael Klawitter, a currency strategist in Frankfurt at Dresdner Kleinwort. “Sterling is being buoyed on concern there will be further bad news about German banks.”
The pound strengthened 0.2 percent to 87.93 pence per euro as of 10:38 a.m. in London. It fell 0.7 percent to $1.58789.
Debts at German banks will blow up “like a grenade” unless lenders participate in the government’s plan to help them prepare for the credit crunch’s next stage, the Telegraph reported, citing BaFin President Jochen Sanio.
Industrial orders in the euro region fell 26.9 percent from a year earlier, after a revised 34.2 percent drop in February, the European Union’s statistics office in Luxembourg said today. Economists forecast a 30.6 percent annual decline, according to the median of eight estimates in a Bloomberg survey. From the prior month, March orders fell 0.8 percent.
Two-year gilts rallied, pushing the yield four basis points lower to 1 percent. The 4.25 percent security due March 2011 climbed 0.06, or 60 pence per 1,000-pound ($1,579) face amount, to 105.71. Bond yields move inversely to prices.
