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German bonds jump, Italian yields stabilise

By Jeff Davies

Markets favored safe havens on Tuesday, as evident in the rise of the yen, precious metals and prices of benchmark sovereign debt.

A wave of risk aversion came in the context of the unknowns and controversies about the agreement between the United States and China. In particular, the government in Beijing failed to declare it would immediately cut or abolish tariffs on American cars, like the other side suggested as part of the deal. German bonds advanced together with counterparts from the US and the United Kingdom, meaning yields dropped, in the wake of a decision by the European Court of Justice that Britain can unilaterally revoke Brexit “under certain conditions.”

The measure of the two-year note dropped 1.7 basis points to a negative 0.616% at 8:53 am GMT, narrowing the spread against the 10-year yield to the lowest in 17 months. The latter lost 2.3 points to 0.285%, unseen since July. The yield on the 30-year German bond fell 2.7 points to 0.947%. Corresponding futures were up by 0.02%, 0.12% and 0.32%, respectively.

Italian yields showed relatively modest moves on news of possible compromise with the European Union. The two-year gauge was up at 1.005% and the ten-year yield grew to 3.146%, compared to the decline to 3.766% for 30-year maturities.

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