Germany failed to attract enough bids to cover the targeted €3 billion (Dh14.6 billion) launch of its new ultra-long bond yesterday, as investors baulked at the record low returns on offer.
The auction drew bids worth €2.747 billion, falling short of the targeted amount and making the result a ‘technical fail'.
The weak outcome mirrors that seen on April 11 when Germany launched a ten-year bond, and underscores that surging demand for the safety of the country's bonds has driven investment returns so low that some are reluctant to buy at current levels.
"It's a stern reminder that you drive yields down too low and basically the interest isn't going to be there," said Marc Ostwald, strategist at Monument Securities in London.
A total of €2.41 billion worth of bids were accepted at an average yield of 2.41 per cent, leaving German authorities to retain a slightly higher-than-usual 20 per cent of the issue for sale into secondary markets at a later date.
That compares with an auction yield of 2.62 per cent at the most recent sale of a German ultra-long bond in January, when 18.1 per cent was retained.
Germany's debt agency said the result reflected a "very volatile and uncertain market environment" in a statement released after the auction.
The new 2044 bond carries a 2.5 per cent coupon, the lowest-ever on a German ultra-long bond.
While the auction result appears weak, the sale still shows Germany is able to borrow at extremely low cost and for a long period of time compared to other Eurozone countries.