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Germany fails to fully sell 1st zero-coupon 30-year bond in auction

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Germany fails to fully sell 1st zero-coupon 30-year bond in auction

Germany sold less than half the securities it offered at its first sale of zero-coupon 30-year bonds.

The Deutsche Bundesbank auctioned €2 billion of the bonds on Aug. 21, but only received bids for 869 million and allotted just €824 million, the central bank said on its website. It retained the remaining €1.18 billion for secondary market operations.

The average yield in the auction was negative 0.11%, meaning that buyers will lose money on the securities if they hold them to maturity in 2050.

The yield on 30-year German bunds in the secondary market gained 6 basis points to negative 0.12% as of about 1.30 p.m. in Berlin following the auction. The yield on the debt fell to a record-low negative 0.25% on Aug. 15.

The sale would test the appetite of investors for a zero-coupon bond and would also determine if the German government could plan further such auctions, Michael Hewson from CMC Markets wrote in a note prior to the sale.

The longest maturity at which Germany has sold zero-coupon debt previously was 10 years, according to Bloomberg News.

The sale comes as investors have been turning to the perceived safety of German bunds amid fears of a global economic slowdown. The yield on 10-year bund fell to a record-low negative 0.70% on Aug. 15, the day after Germany reported an economic contraction in the second quarter.

The Deutsche Bundesbank has warned that the economy may shrink further in the third quarter, pushing the country into a technical recession. The government is reportedly preparing a stimulus plan to spur growth.