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Investors just can’t get enough of Germany’s short-dated debt.
The yield on Germany’s two-year bond has fallen to another record negative low this morning as bondholders snap up German assets amid escalating fears about the EU’s political stability.
Dubbed one of the “most sought after assets in financial markets“, the price on Germany’s two-year “schatz” bond has been pushed to an all-time high this week, driving yields head-long towards the minus 1 per cent mark.
Yields are currently trading at minus 0.96 according to Bloomberg and have declined 15 basis points this week – their best performance since the depths of the eurozone crisis in July 2012.
The rally has been turbo-charged by fears that Marine Le Pen is closing the gap on her rivals in France’s presidential election and could come good on her promise to take the eurozone’s second largest economy out of the single currency area.
Ms Le Pen is on course to triumph in the first round vote with a 27 per cent vote share. Her two main rivals are polling around 20 per cent.
Germany’s two-year bond prices have also been given a kick higher by the European Central Bank, which tweaked its bond-buying rules to include the assets in its QE measures. The ECB has previously limited its sovereign debt purchases to yields above -0.4 per cent.
Germany’s short-dated paper is considered one of the eurozone’s “ultra” safe assets, rallying amid concerns the ECB may be ready to pull the plug on its QE measures this year.
The moves have helped drive the gap between French and German two-year bonds to the highest in four years.