Speculation on the US policy of reducing asset purchases had resulted in declining demand for fixed income assets from all over the world. One of these is the German bunds, as it faltered this week as its 10 yields rose the highest in the last five months.
Other European bonds fell, such as the Italian and Spanish bonds, for a seventh week amidst the prospect that the Federal Reserve Bank stimulus package would be removed in favor of higher yield assets. This was followed suit by the slumping of Greek securities, which forced rates to its highest levels in the past year.
The central cause of such turmoil is the statement by Fed Chairman Ben S. Bernanke after a policy meeting last June 19 that the bank may be reducing its bond purchases this month should the US economy improve.
For its part, Germany's ten year yields jumped 21 basis points or about 0.21 of a percentage point just this week to about 1.73%. This is the largest recorded increase since the period ending January 4. The 1.5% bund with a maturity date of May 2023 declined by 1.9% or Eur19 per Eur1,000 face amount.
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