Market Intelligence

Apple's warning keeps downward pressure on German Bund yields

Reuters

By Virginia Furness

LONDON, Jan 3 () - German government bond yields held near their lowest in two years on Thursday after a rare revenue warning by U.S. tech giant Apple fuelled a flight to global safe assets amid renewed concerns about slowing Chinese growth.

Apple's fourth-quarter revenue drop and the ensuing sell-off in global equities suggested that an economic slowdown in China was worse than many expected, casting a shadow over the outlook for corporate profit growth this year.

Germany's 10-year bond yield was most recently at 0.177 percent, up about half a basis point on the day, from a low of 0.148 percent earlier in the session . Other high- grade euro zone bond yields also turned positive, having started the session lower. ,.

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Guntermann said he did not expect the rally to continue, but said the downside risk of weak data would not lead to an "imminent reversal" in bund yields.

In the periphery, Italian government bond yields rose the most, gaining 12 basis points. Portugese and Spanish yields were up to three basis points higher.

Analysts said the rise in Italian yields was caused by several factors, including the equity-led weakness, a Spanish bond auction and improving liquidity.

"The past few sessions have been very low liquidity and that is now picking up," said Jan von Gerich, rates strategist at Nordea. "The euro area is struggling even more than it looked, and Italy should suffer more."

Italy's 10-year government bond yield was on track for its biggest one day rise in almost a month, up 13 basis points on the day to 2.817 percent, though still far off the mid-November highs of 3.71 percent.

Analysts are also looking to Italian preliminary inflation data on Friday for evidence as to the rate of Italian growth.

"If we see another contractory print, it would underline the significant possibility that GDP growth was negative in Q4, which means Italy was in recession of the second half of last year," said Richard McGuire, rates strategist at Rabobank.

Spanish bonds were up to three basis points higher following its sale of 5 billion euros of bonds at auction.


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