Wednesday, November 23, 2011

German Bond Auction Adds to Investor Worries on Euro Zone

Wall Street Journal
November 23, 2011

A German government debt auction drew some of the weakest demand since the introduction of the euro, signaling diminishing investor appetite for even the safest euro-zone assets amid Europe's worsening debt crisis.

The auction sent waves through markets as investors, battered by a spate bad news out of Europe over the last few months, initially interpreted it as a sign of the crisis reaching the core of the euro zone.

The German government was able to sell only €3.644 billion ($4.92 billion) of the €6 billion in 10-year bunds on auction for an average yield of 1.98%.

Interest rates on Germany's 10-year bonds rose sharply after the auction to 2.09%, their highest level in three weeks.

The euro fell to its lowest level in seven weeks against the dollar and traded at $1.3333 in late trading in Europe. That reinforced the view that money is now flowing out of the euro zone. Until recently, many of the safe-haven flows have happened within the currency union, reflecting flight from riskier sovereigns to safer ones.

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