German government bonds are trading mixed Tuesday, with the long-dated issues suffering in the wake of Dutch central bank announcement late Monday to modify the interest rate curve for insurers, in turn steepening the yield curve. The DNB said it will adjust the method for extrapolating the interest rate curve using an Ultimate Forward Rate (UFR), which is set at 4.2%, to be reached in 40 years from the point of 20 years. However, this change only applies to insurers and not pension funds. In supply news, the biggest news was Ireland’s return to the T-bill market (new 3-month T-bill for E500mln on Thursday, marking first sale since Sep 2010 and since it was effectively forced out of the new issue market and requested external bailout on November 21, 2010. In other supply news, the Netherlands priced E6.0bln of its new 5-year benchmark DSL bond via DDA at +60bps versus 4.00% Jan 2018 Bund. UK sold stg1.75bln of 2030 Gilt, cover 2.06, tail 0.2bps. Belgium sold 3-/6-month T-bill for E3.084bln & EFSF sold E1.913bln of a new 3-month Bill.
EasyForexNews Research Team