German average bond yield negative for first time

The average yield on German government debt has dropped below zero for the first time, an indicator of how the ECB’s bond-buying programme has made the previously unthinkable a reality.

Price gains on German bonds pushed yields through January 2024 below zero, driving the average yield to maturity on securities in the Bloomberg Germany Sovereign Bond Index to minus 0.003% at Wednesday’s close.

That means investors are prepared to accept losses for holding to maturity $809bn (€756bn) of the $1.16 tn total of bonds in the index. The yield on 10-year bunds, the eurozone’s benchmark, fell below 0.10%, yesterday, for the first time on record.

The bond-market rally reflects the demand for government debt in the wake of the ECB’s €1.1tn quantitative-easing plan. Yesterday, ECB president Mario Draghi said that the policy makers’ plan must be implemented in full to work, adding more fuel to a rally that is already pushed yields across the region to record lows.

Yesterday, German 10-year yields dropped two basis points to 0.09% and touched 0.086%, the lowest since Bloomberg started tracking the data in 1989. The yield on German 30-year bonds fell below 0.5% for the first time.

Bloomberg