German debt rallies, two-year bonds underperform

German debt rallied on Wednesday and was likely to remain supported as French and German plans for closer fiscal integration did little to sooth contagion concerns, but short-dated bonds underperformed after a lacklustre debt auction.

French President Nicolas Sarkozy and German Chancellor Angela Merkel unveiled plans for economic governance, seen as essential first steps to the eventual fiscal integration within the single currency area that many in markets say is needed.

But the meeting revealed no concrete measures to tackle the region's immediate concern: funding for weaker euro zone states.

"Nobody expected an actual announcement (of plans to issue a common euro zone bond)... but there could have been more talk about E-bonds and perhaps at least leaving the door open for an increase in the value of the EFSF (bailout fund)," said Niels From, chief analyst at Nordea Bank.

Read Full Article from Reuters

- Posted: 2011-08-17 11:42:00

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