German bonds fall; stocks, euro vulnerable

Thu Nov 24, 2011 8:34am EST
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By Natsuko Waki

LONDON (Reuters) - German government bond yields hit their highest in nearly a month and world stocks held near 7-week lows Thursday, a day after a weak debt sale in Berlin fanned fears the euro zone debt crisis is starting to threaten its biggest > falling 115 ticks on the day to 134.66, the lowest since October 31.

Ten-year German government bond yields rose as high as 2.14 percent compared with economy.

The euro remained vulnerable near a 7-week low against the dollar as investors eyed a meeting of leaders from France, Germany and Italy for any signs of cracks in Berlin's resistance to more concerted action to end the two-year-old crisis.

Repercussions from the auction, in which Germany found no buyers for almost half of the 6 billion euros on offer, extended into a second day, with Bund futures just 1.724 percent earlier this month.

That is higher than the equivalent U.S. Treasury yield of around 1.88 percent and Japan's 1 percent, although the difference also reflects the higher benchmark interest rate set by the European Central Bank.

"I think we are moving closer to a policy response probably, which could be either more aggressive ECB action or the idea of euro bonds could gain some traction," said Rainer Guntermann, strategist at Commerzbank.

"In either case the credit of the core countries could be increasingly diluted, including also German Bunds especially when it comes to euro bonds."

German, U.S. and UK 10-year real yields -- benchmark government bond yields minus consumer prices inflation rate -- are in negative territory, with Japan boasting the highest real yield among the four of around 1 percent.   Continued...