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Short-dated German govt bond yields hit 1-1/2 week high after ECB survey
April 19, 2017 / 10:06 AM / 8 months ago

Short-dated German govt bond yields hit 1-1/2 week high after ECB survey

LONDON, April 19 (Reuters) - Yields on shorter-dated German government bonds rose to 1-1/2 week highs on Wednesday, with one analyst citing a release by the ECB on market financing conditions for the move.

In a survey of banks released on Wednesday, the European Central Bank said the liquidity and functioning of markets for the underlying collateral, especially in government bonds, has deteriorated.

The scarcity of high-quality short-term debt, which is used as collateral in funding markets, has helped drive short-dated bond yields lower.

Commerzbank strategist David Schnautz said the bank survey could encourage the ECB to take action to address a shortage of bonds for use as collateral.

“So far the ECB’s mantra has been that markets are functioning normally, so it seems to be softening its stance by acknowledging the knock-on effects of QE to the proper functioning of the market,” Schnautz said.

Germany’s 2-year government bond yield rose 4 basis points to a 1-1/2 week high of minus 0.81 percent.

Five-year German bond yields also rose to a 1-1/2 week high of minus 0.48 percent. (Reporting by Abhinav Ramnarayan; Writing by Dhara Ranasinghe; Editing by Nigel Stephenson)

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