Wednesday saw a dramatic selloff in German government bonds, with the yield on Deutschland’s 10-year debt jumping from 0.1005 percent to as much as 0.1641 percent in the course of a single trading day. Bill Gross, the billionaire bond manager who had just on Tuesday declared German bunds “the short of a lifetime,” must surely be pleased.
Deutsche Bank strategist Jim Reid has some thoughts:
… [The] move may well have been the second largest on record now, with yields now more than doubling from the lows on Monday of 0.075%. The move in Gilts was also pretty sizable too after a hawkish set of BoE minutes with 10 year yields climbing +14.7bps to 1.713%—the worst single-day yield move since 28th August 2013. With regards to the Bund story there doesn’t seem to be one key driver and it seems to be due to a combination of 1) the BoE-led Gilt move, 2) the big rally in Greece yesterday reversing some flight to quality trades and 3) perhaps some follow on from Bill Gross’s tweet on Tuesday that Bunds were ‘the short of a lifetime’ better than the pound in 1993 and that the only question is timing/ECB QE.
As of Thursday, the yield on the benchmark 10-year bund is hovering around 0.42 percent.