EuropeanApr 30 2015

German bonds sell-off after Gross ‘short of a lifetime’

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German bonds sell-off after Gross ‘short of a lifetime’

German government bonds sold off sharply again this morning following a shock rise in the yield on the eurozone economy’s debt yesterday.

After hitting a record low of 0.07 per cent on April 20, the yield on 10-year German government debt, which moves inversely to price, rose to 0.28 per cent at the close of the market yesterday.

The yield on the debt, called ‘bunds’, spiked up further to 0.38 this morning before falling back to currently trade at 0.335 per cent.

It still means the yield on 10-year bunds has risen by more than 350 per cent in just 10 days, meaning investors who bought into the debt at a yield of 0.07 per cent would be sitting on substantial losses.

The sell-off breaks a strong rally that had seen the yield on 10 year bunds fall from 1.5 per cent in the past 12 months, driven by first the expectation and then the reality of quantitative easing from the European Central Bank, which has pledged to buy up eurozone government debt until at least September 2016.

On April 21, Janus Capital’s Bill Gross had labelled 10-year bunds “the short of a lifetime”.

In a tweet on the Janus Capital account, high profile bond investor Bill Gross had said shorting bunds could be “better than [shorting] the pound in 1993”.

However, he cautioned that there was still a question of timing, especially given the central bank’s quantitative easing programme.