German 10-Year Bund Yield Dips Below 3% For The First Time

German 10-Year Bund Yield Dips Below 3% For The First Time

FRANKFURT (Dow Jones)--The yield on the German 10-year benchmark government bond Thursday slid below 3% for the first time ever, as a rush into safe-haven buying intensified after recent economic data provided further evidence of recession in the euro zone.

"A break through 3% this time around would indicate that the economy is in a slump for the long run, unlike the previous test in 2005," said Orlando Green, interest rate strategist at Calyon.

The yield on the 3.75% January 2019 bund traded at 2.964%-2.969% at 0816 GMT. Wednesday, the yield approached the 3% level but closed above it at 3.046%, after a volatile session.

Ten-year yields last hit 3% in 2005, when the European Central Bank's policy rate was 2.0%, but they didn't fall below that level.

Later in the day, the European Central Bank is expected to cut its key policy rate. In a Dow Jones Newswires survey, 31 economists out of 46 polled said they expected a 50 basis-point reduction, while 12 economists forecast a 75 basis-point cut. There was one vote each for a 25 basis-point and a 100 basis-point cut, while one bank issued no forecast.

Longer-term bonds are more sensitive to inflation than shorter-maturity debt, so the drop in yields on benchmark bunds indicate that price pressures may remain weak for a long time in the euro area.

-By Christopher Emsden and Emese Bartha, Dow Jones Newswires; +49 69 2972 5516; emese.bartha@dowjones.com

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(END) Dow Jones Newswires

December 04, 2008 02:44 ET (07:44 GMT)


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