Germany

Leading fund managers believe gilts now look like the next safe haven bond market to come under threat ahead of DMO sale this week.

Yields on short-dated German government bonds turned negative this week as bondholders paid to lend to the country, despite a dismal auction of 10-year bonds on Wednesday.

The yield on German bunds has risen above UK gilts for the first time since 2009 after Japan shifted out of bunds overnight following Germany's disastrous debt auction.

So suddenly no-one wants to lend to Germany for the next ten years - hardly surprising because by lending to Germany investors are effectively lending money to Greece, Portugal and even Italy.

Kames Capital's bond fund manager Stephen Snowden said the ongoing crisis in Europe has left gilts looking much more secure than bunds in the medium term.

European equity markets and the euro fell deeper into the red today as Germany failed to attract buyers to its latest government debt auction.

Fears over the European debt crisis have escalated as a €6bn German bund auction fell flat today, showing investors are now demanding even higher compensation from an asset class previously seen as a safe haven.

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