Germany paid the second lowest rate in its history to borrow for 10 years, data showed today, as investors continued to flock to the safety of Europe's top economy despite easing market tensions.
Germany paid an average rate of 1.82% at an auction of 10-year bonds, or Bunds, considered the gold standard of euro zone debt, said its central bank, which organised the sale.
Demand was solid, as investors bid for €5.7 billion worth of bonds with only €4.1 billion being sold. At the last such auction, in January, the average yield was 1.93%.
The auction was the latest in a series of successful bond sales in the euro zone as tensions on the bond market have calmed at the beginning of the year.
According to many analysts, euro zone banks that have borrowed cheaply at the European Central Bank's recent liquidity operations are ploughing the cash into government debt, driving down borrowing costs.
Germany is one of only four euro zone countries - the others being Finland, Luxembourg and the Netherlands - that continue to enjoy a top triple-A rating from S&P after the downgrades.
But Germany's safe-haven status was called into question in November when an auction of 10-year debt attracted minimal demand, sending markets into tailspin. At that time, Germany received bids for only €3.9 billion' worth of Bunds, despite offering €6 billion.
Since then, Germany has enjoyed strong demand for debt of all maturities, with the yield even turning negative on some short-term paper, meaning investors effectively paying Germany for the privilege of lending it money.
Portugal raises €1.5 billion at lower rates
Bailed-out Portugal managed to raise €1.5 billion at much lower rates today, despite recent increased funding pressures on the markets, the national debt agency said.
The agency said it sold €750m in three-month bills at 4.068%, down from the 4.346% paid at a January 18 sale, with another €750m in six-month bills going at 4.463%, down from 4.74%.
Bids fell, however, with offers for the 3-month bills 2.8 times the amount on offer and 2.6 times on the six-month bills, down from 4.1 times and 3 times on January 18, it said.
The sale, which aimed to raise €1.25-1.50 billion, comes as yields - the rate of return earned by the holder - on its longer-term government debt have soared.
Lisbon got an EU and International Monetary Fund bail-out worth €78 billion in May 2011 in return for a series of tough austerity measures to slash public spending and increase revenues.
The austerity programmes have, however, slowed the economy further and in recent weeks speculation has grown that Portugal may need more help, driving its borrowing costs sharply higher.
The yield on the benchmark 10-year government bond stood at 15.556% this evening, down from recent highs but still way above sustainable levels of 6-7% for long-term funds.
The state debt agency puts Portugal's borrowing needs this year at €17.4 billion and plans to raise €5.25-6.5 billion in the first quarter of the year.
