Poor Auction Demand Shows German Bunds Losing Appeal

Germany sold 3.65 billion euros of new 10-year government bonds on Tuesday, in an auction which was technically uncovered after Berlin offered the lowest coupon on record for this maturity. Demand at the sale was below this year's average, with a bid/cover ratio of 1.1 compared with an average 1.56.

The average yield of 1.98 percent versus a 2.74 percent average. "It's really bad. The Bundesbank had to retain 39 percent of the issue. Bunds are starting to lose their appeal because markets have to believe the euro bonds story and Germany is very close to start, essentially, to guarantee the debt of other countries," Achilleas Georgopoulos, Strategist at Lloyds Bank, London said.