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Germany's bond market reacts to weak growth

On Wednesday government bond yields in Germany tumbled to new record lows after news that the economy shrank in the subsequent quarter strengthened anticipations for financial policy boost soon.

germanyPhoto: Flickr

Germany's GDP declined 0.1 percent quarterly later adding 0.4 percent in the first quarter of the year, the most recent sign that Europe's greatest economy is taking a thump from world exchange issues.

The 10-year German borrowing cost plunged to — 0.624 percent, a crisp record low that takes its fall the current year to right around 90 bps.

Over the euro area, most long-dated bond yields were a tad lower during the day.

While news on Tuesday that Washington has postponed taxes on some Chinese goods started a flood in world shares exchanges, interest in fixed revenue stayed solid.

Experts put that down to a frail monetary setting just as rising threats running from Britain withdrawal from EU to strife in Hong Kong, a collapse in Argentina's monetary markets and political vulnerability in Italy.

In a further indication of developing anxiety about recession chances, the gap between U.S. 2-year and 10-year note yields on Tuesday tumbled to 0.6 bps — the tightest since June 2007.

The spread is an intently watched measurement for recession signs. The last time this yield curve change direction was in June 2007 amidst the U.S. sub-prime mortgage turmoil.

Italian bond yields declined for the third session in a row as Italy's Senate eased back a government uncertainty.

The Senate on Tuesday deferred till one week from now further discussion on a progressing government emergency, disappointing a push by Matteo Salvini, head of the League party, for snap elections.

Italy's 10-year bond yield lost 5 bps to 1.57 percent, tightening the gap over risk-off German Bund yields to 219 bps — down from five-week peaks touched on Friday at 239 bps.

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