For a second week in a row, German government bonds declined with its ten year yields increasing to a three month high. This comes after concerns that the Federal Reserve would start reducing stimulus programs, lowering the enticements for fixed income assets.
Aside from German bonds, French and Belgian securities also declined as the worldwide bond market is bracing for its worst coming month in ten years. The Italian ten year bond fell at a lower rate compared to their German counterparts after Italy sold off Eur5.75 billion or US$7.47 billion in debt instruments due on 2018 and 2023.
In a statement, Fed Chairman Ben S. Bernanke said that the central bank would be reducing record stimulus should the economy show continued improvements.
Germany's ten year yield jumped seven basis points or 0.07 of a percentage point to 1.51% at close of trading in London. The yield further increased to 1.55% on May 27, its largest since Feb 25. On the other end of the spectrum, the 1.5% bond due on May 2023 declined by 0.68 or by Eur6.80 per face amount of Eur1000 to just 99.96.
The French ten year bond increased by 13 basis points to 2.07% this week while the Belgian debt increased 14 basis points to 2.24%.
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