The uptrends in the yields of the German ten-year Bunds and the US ten-year T-Notes (line a) shows a sharp increase since the start of May.
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The pleasant surprise has bunds trading close to their lows and the peripheral spreads trading much tighter.
Tiomkin thinks the fact that German Bunds have rallied suggests bond investors are betting Germany will stop bailing out the sovereign debt of other European countries.
While French government bonds suffered with the market jitters surrounding Spain earlier this week, the premium above German bunds that France pays to borrow money is well below levels seen at the peak of financial stress last year, and French bonds have remained relatively steady.
Other than the safe-haven German bunds, European bond yields were on the rise as fears of an EU debt contagion are again surfacing.
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German government bonds, judged to be the safest in the euro area, jumped in early trading, with the yield on 10-year Bunds hitting its lowest level of the year, at 1.37%, though it later rose to 1.4%.
As Loeb and other high profile investors reveal their winnings, and as spreads have narrowed relative to German bunds, the trade can become increasingly crowded.
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Also, how many times this year have was seen Greek bonds declining rapidly while at the same time German bunds are rising on demand for safety.
As a result Belgium debt yields are well over 3% above German Bunds and the country might not be that far away from the debt spiral that has entrapped those further south like Spain and Italy.
Rising chances of a so called Grexit have displaced capital to the apparent safety of German bonds, pushing 30-year bunds below 2% for the first time.
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An auction of German 10-year bunds Wednesday produced the lowest yield since last July, which underscored the keener risk aversion in the market place this week.
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Italian and Spanish bond prices slumped forcing benchmark yields up at a double-digit pace as speculators traded them in for the safer bet of German bunds.
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The premiums investors have to pay to hold Italian and French 10-year government debt over benchmark German Bunds rose to their highest in the euro era Thursday with signs growing that the Greek government may fall.
Flight-to-safety buying of U.S. Treasuries, German bunds, gold and the U.S. dollar all quickly came back into vogue late Monday.
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The euro zone's temperature chart the spread of bond yields over German bunds is gradually narrowing.
German bunds also rallied Friday on the generally downbeat data coming out of the EU. There is also uncertainty among European investors regarding the upcoming Italian elections that begin this weekend.
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Spreads on ten-year government bonds over German Bunds a measure of the perceived risk that Greece may default on debt repayments edged upwards.
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It is also thinking about reintroducing a cap on rupiah accounts held by foreigners, the latest in a series of dykes, bunds and culverts designed to control flows of capital.
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German 10-year bunds surged by 112 ticks Friday as the benchmark yield slid by seven basis points.
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It will be either a government based on dilution and compromise or a weak day-to-day, deal-and-favor arrangement that will see the value of the pound fall on the foreign exchanges and the premium of U.K. gilts over German bunds widen.
The most important indicators, spreads on Spanish and Italian bonds over German bunds, have come down dramatically.
The euro weakened in response to the report while peripheral government bond spreads continued their blow out against German bunds.
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On the flip side, bond yields are back on the rise in Spain, and Germany saw lackluster demand at an auction of 10-year bunds.
Thus there is already barely the width of a cigarette paper between the yields on, say, ten-year French government bonds and their German equivalents, bunds.
Despite the return of former Prime Minister Silvio Berlusconi, blamed by many for having put Italy on its current track, and the rise of comedian Beppe Grillo, whose anti-establishment Five Star Movement has rejected political alliances and carries the momentum, Italian bonds were yielding 4.65% on Monday, only 315 basis points above German bunds.
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Ten-year bond yields in the country climbed to 5.99% and 6.58%, respectively, as spreads over corresponding German bunds widened further.
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