Country sells two-year notes at record-low yield below zero ECB’s Draghi set to address German lawmakers on policy Share on Facebook Share on Twitter Germany’s negative-yielding bonds are proving hard to resist for investors concerned that banking-industry woes in the euro area will deepen, prompting them to seek haven assets. Benchmark 10-year bunds held on to a two-day gain that on Tuesday pushed the yield to the lowest level below zero since July. The country auctioned two-year notes on Wednesday at a record-low negative yield, even though the securities don’t qualify for inclusion in the European Central Bank’s asset-purchase program. With the average weighted yield of securities in the Bloomberg Germany Sovereign Bond Index at minus 0.37 percent, they still managed to outperform higher-yielding counterparts in the past week. That extended a rally which was sparked by the Federal Reserve’s Sept. 21 decision not to raise U.S. interest rates. European Central Bank President Mario Draghi, who faces German lawmakers in Berlin on Wednesday, has emphasized a readiness to act if officials deemed it necessary. “The latest bout of risk aversion has really helped to push core yields lower,� said Martin van Vliet, an interest-rate strategist at ING Groep NV in Amsterdam. “In this environment, investors are willing to pay big time to own ultra-safe bonds. For now, these deeply-negative yields are here to stay.� Benchmark 10-year bond yields were little changed at minus 0.132 percent as of 1:09 p.m. London time, after sliding on Tuesday to minus 0.161 percent, the lowest since July 12. The price of the zero percent security due in August 2026 was at 101.316 percent of face value. Why Buy? Buying that security and selling it in a month would produce a price gain of about 0.7 percent should the yield drop back to its record-low level reached in July of minus 0.205 percent, according to data compiled by Bloomberg. Demand for securities from core nations in the euro area including Finland is getting a boost as investors put aside their disappointment from earlier in the month when the ECB refrained from increasing stimulus. Relatively slow growth and subdued inflation had already fueled speculation that the central bank’s quantitative-easing program will be extended beyond the scheduled March 2017 expiry, boosting bonds across the board. And now the banking-industry concerns are emphasizing bunds’ safety features.

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