The rush for eurozone government debt showed no signs of slowing last week, as investors flocked to new fund raisings by Italy and Belgium a day after Spain saw record demand. January has seen a flurry of issuance from European governments including Ireland, Portugal, France and Cyprus, seeking to take advantage of demand for long-dated government debt despite the low yields on offer.
Orders for a new 30-year Italian government bond have topped 44 billion euros ($49 billion), the highest-ever demand for an Italian syndicated issue, one of the deal's lead managers said.
Belgium received more than 27 billion euros of orders in a syndicated 10-year bond, almost five times the six billion euros it asked for on Wednesday, one of the bond's lead managers said.
"The supply has really been taken down by strides across all sectors (of investors). Most of the order books are very well oversubscribed," said Christoph Rieger, head of rates and credit research at Commerzbank.
Peter Chatwell, an analyst at Mizuho, attributed the demand to the vast amount of central bank-provided liquidity in the global financial system and investors' view that euro zone interest rates would not be rising any time soon.
"If you have positive yields on every 30-year bond in Europe, investors want to buy them while they can," he said.
On Tuesday, Spain attracted the largest order book ever for a euro zone bond sale - more than 52 billion euros - with its new 10 billion euro, 10-year bond, shortly after the country formed a new government and broke a lengthy political impasse.
Germany also raised 1.114 billion euros in an auction to top up its 0.0%, 30-year Bund. In Wednesday's price action, euro zone bond yields fell from two-week highs after US Treasury Secretary Steven Mnuchin said tariffs would remain in place following the signing of an initial US-China trade deal, injecting some caution into markets.
Analysts said that after the recent run higher for yields, the pause reflected position squaring as well as caution about the trade deal and future tensions between the United States and China.
The 10-year German bond yield fell 3 basis points to -0.201%, still not too far off the more than six-month highs of -0.157% touched at the start of January. Bond yields in other euro zone markets were down by a similar amount, including France, Belgium and the Netherlands.
Italian bond yields were slightly lower, with the 10-year down 1.1 bps at 1.381% and the 30-year down 2.1 bps at 2.442%. "There seems to be some second thoughts about the phase one trade deal," said Commerzbank's Rieger, referring to the initial US-China agreement.
Rieger said it may be a case of "buy the rumour sell the fact" given the rally in markets ahead of the deal's signing, but solid risk appetite meant that over the next few weeks German yields should hold above -0.2% and move higher. The German economy grew at 0.6% in 2019, its slowest rate since 2013, data showed.
"Today's GDP print is neither strong enough to assuage growth fears in the euro zone, nor weak enough to shock German policy makers into a meaningful fiscal response," asset manager Brooks Macdonald told clients in a note.
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