March 19, 2020 / 1:02 PM / 9 days ago

Germany's 10-year bond yield rises to two-month high

LONDON, March 19 (Reuters) - Germany’s 10-year bond yield rose to a two-month high on Thursday, reversing earlier falls in thin trade following a report that the country will soon declare an exception to its debt brake.

An exception to the debt brake enshrined in the constitution will take place during a meeting on Monday to finance fiscal stimulus measures in the fight against coronavirus, an official with knowledge of the plan said on Thursday. This means that Berlin will take on new debt this year for the first time since 2013, the official added.

German bond yields, which had fallen in the wake of fresh ECB stimulus, reversed direction and rose. Germany’s 10-year bond yield hit a two-month high at -0.199% and was last up 2 basis points on the day.

“The news that the German government plans to seek approval for unlimited borrowing would be consistent with higher yields even under normal circumstances,” said Chris Scicluna, head of economic research at Daiwa Capital Markets. “But there is a lot of market dysfunction right now and forced selling of more illiquid bonds, peculiarities.”

Reporting by Dhara Ranasinghe; Editing by Saikat Chatterjee

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