GERMANY’S 10-YEAR bond yields rose to the highest in more than two months, as a constitutional court cleared Europe’s permanent bailout fund for ratification, damping demand for the safest government debt.
Spain’s 10-year securities led gains among the euro region’s lower-rated sovereigns amid optimism the €500 billion European Stability Mechanism would help stem the debt crisis. Irish and Portuguese bonds also advanced before euro area finance ministers meet in Cyprus in two days.
Germany must make sure its share of the ESM is capped at €190 billion, the court said yesterday. The decision is “one nagging issue that’s out of the way and means the focus is now going to be on the Eurogroup meeting,” said Ciaran O’Hagan, head of European rates strategy at Société Générale in Paris.
Germany’s 10-year yield rose seven basis points, or 0.07 percentage points, to 1.62 per cent at lunchtime yesterday It reached 1.65 per cent, the highest since June 29th, and advanced through its 200-day moving average for the first time since July 8th last year.
The 1.5 per cent bond due on September 2022 dropped 0.66, or €6.60 per €1,000 face amount, to €98.945. The euro jumped 0.3 per cent to $1.2894 and the Stoxx Europe 600 gained 0.1 per cent.
The Federal Constitutional Court in Karlsruhe dismissed motions that sought to block the ESM and a deficit-control treaty championed by chancellor Angela Merkel. – (Reuters)
