UPDATE 3-Euro area yields dip, focus back on supply with Irish 20-year bond

Yoruk Bahceli
·2 min read

* Ireland sells 20-year bond as long-dated sales continue

* German 10-year yield falls after rising to four-week high

* Little impact on bonds from U.S. data (Updates prices)

By Yoruk Bahceli

AMSTERDAM, April 15 (Reuters) - Benchmark German bond yields fell from four-week highs on Thursday as the market turned its focus back to issuance with a long-dated bond sale by Ireland.

Ireland received 35 billion euros ($41.9 billion) of demand for a new 20-year bond that will raise 3.5 billion euros, slightly higher than the target reported by Reuters on Wednesday. The deal came hot on the heels of long-dated issuance from Austria and Spain this week and Italy last week, which issued up to 50-year maturities.

Long-dated issuance has resurfaced after dying down in February when the bond sell-off driven by growth and inflation expectations hit longer-dated bonds particularly hard, as they are more sensitive to a rise in underlying rates. Bond yields move inversely with prices.

While demand for Spain and Austria's bonds fell over the course of their deals, demand rose even as Ireland cut the yield on offer, from 23 billion euros at the start of the sale.

Overall, Rabobank's head of rates strategy Richard McGuire said demand for long-dated bonds remained positive.

"The sell-off has meant that these deals are more attractive, they're cheaper," McGuire said.

Euro zone bond yields fell on Thursday. Germany's 10-year yield, the benchmark for the region, was down 3 basis points to -0.294% at 1515 GMT, after touching its highest in four weeks at -0.249% in early trade.

Bond yields brushed aside economic data from the United States, extending their fall even as U.S. retail sales rose far more and initial state unemployment benefits claims fell much more than expected, in further signs of economic recovery in the U.S.

And with market gauges of inflation expectations barely changed on Thursday , Rabobank's McGuire saw little fundamental drive in the drop in yields.

Earlier, Mizuho analysts said that the German 10-year yield's move above -0.26% "would be significant in breaking the tight range that has held since end-Feb".

Verbal intervention and an acceleration of the ECB's bond purchases had calmed euro area bonds in March and German yields dropped then.

But they are rising again in April and have underperformed U.S. Treasuries, whose yields have fallen this month.

Mizuho analysts expect Germany's 10-year yield to rise to -0.15% by the end of the second quarter. ($1 = 0.8356 euros) (Reporting by Yoruk Bahceli and Danilo Masoni; Editing by Mark Potter, Kirsten Donovan)