BERLIN (Reuters) – The latest economic data provide hope that Germany’s economy can return to pre-crisis levels in early 2022, Finance Minister Olaf Scholz said on Tuesday.

a group of police officers riding on the back of a car: FILE PHOTO: VW re-starts Europe's largest car factory after coronavirus shutdown

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FILE PHOTO: VW re-starts Europe’s largest car factory after coronavirus shutdown

Germany’s rising level of government debt is not a problem because the country can tackle the situation with “good growth”, Scholz told TV station CNBC in an interview.

Scholz rejected concerns that state aid was artificially keeping alive companies that were in financial troubles in the wake of the crisis caused by the coronavirus pandemic.

Olaf Scholz wearing a suit and tie smiling and looking at the camera: German Finance Minister Scholz and Justice Minister Lambrecht hold news conference in Berlin

German Finance Minister Scholz and Justice Minister Lambrecht hold news conference in Berlin

Germany’s government has taken steps such as allowing firms to delay bankruptcy filings until the end of the year, extended from an original deadline of end-September.

Helped by these measures, the number of firms declaring insolvency in Germany fell 6% in the first half of 2020 compared with the year-earlier period.

Critics say suspending insolvencies delays but does not prevent the collapse of “zombie companies” that are artificially kept afloat.

Firms are making necessary decisions and adjustments despite the crisis, Scholz said. For instance, many companies are cutting staff at the moment instead of making use of state aid that would allow them to cut workers’ hours, he said.

“The debate about zombie companies is nonsense,” Scholz said.

(Reporting by Christian Kraemer, writing by Kirsti Knolle, editing by Maria Sheahan)

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By Olga Cotaga

LONDON, Oct 7 (Reuters)The price for benchmark German debt increased on Wednesday after German industrial output unexpectedly slipped in August, suggesting the recovery in Europe’s largest economy from the coronavirus shock could be weaker than hoped.

German 10-year yields fell 1.6 basis points to -0.52% DE10YT=RR after inching to a two-week high on Tuesday.

The day before, the gap between German and U.S. 10-year yields US10DE10=RR widened to its largest since March as U.S. yields rose. They gave back those gains after President Donald Trump on Tuesday abruptly cancelled talks in Washington over coronavirus aid.

For the Italian 10-year government bond, the yield fell to its lowest in more than a year at 0.765% IT10YT=RR as traders expected more monetary policy stimulus from eurozone’s central bank. It last traded down 1.6 bps.

On Friday, the Italian 10-year BTP yield fell to a record low of 0.751%, Tradeweb said.

“People think it’s a little bit of a one-way bet on more stimulus being required from the ECB,” said Lyn Graham-Taylor, fixed income strategist at Rabobank.

On Tuesday, dovish comments from the European Central Bank chief raised expectations for further stimulus.

If the euro strengthened, that would increase the likelihood of ECB easing, Graham-Taylor said.

“If the dollar is stronger, it is probably due to some risk-off factors and this is probably also going to encourage the ECB to have to do more easing,” he added.

Traders await minutes from the Federal Reserve to be released later in the day.

ING analysts said they did not expect the minutes “to be an existential threat to the reflation trade taking hold in dollar rates markets.”

Still, forward Fed Fund rates price in the first full hike only by the middle of 2024, which is slightly more hawkish

BERLIN (Reuters) – Orders for German-made goods rose 4.5% in August, more than expected, boosting hopes for a robust third-quarter in Europe’s largest economy after the coronavirus shock.

The increases were driven by demand from the euro zone, the Federal Statistics Office said on Tuesday, suggesting companies are making good progress back to pre-crisis levels. A Reuters forecast had predicted a 2.6% gain on the previous month.

“The catch-up process for new industry orders is continuing at a remarkable pace,” the economy ministry said in a statement.

Order intake was now only 3.6% lower than in February, before lockdown measures were imposed to slow the spread of the coronavirus, the office said.

Economists applauded the strong data, but cautioned that rising infection rates across Europe were increasing the risk of setbacks.

“It is difficult to imagine how German manufacturing could escape another round of lockdown measures with important trading partners,” said ING Bank economist Carsten Brzeski.

“Nevertheless, today’s industrial order data suggest that full order books – at least in the near future – could help the manufacturing sector to overtake the service sector.”

Official figures released last week showed German retail sales rose much more than expected in August and unemployment fell further in September, boosting hopes that household spending would power a recovery.

Figures from the statistics office showed that orders from abroad increased by 6.5%, boosted by a 14.6% surge in orders from the rest of the euro zone. Domestic orders rose by 1.7% on the month.

The German economy contracted by 9.7% in the second quarter as household spending, company investments and trade collapsed at the height of the pandemic.

An easing of lockdown measures, coupled with an unprecedented array of rescue and stimulus packages, has led to a robust recovery in the third quarter, but

(Bloomberg) —

German bonds look set to face a more volatile end to the year after seeing the narrowest quarterly trading range ever.

An increasing shortage of bunds amid slowing government debt sales and continued purchases by the European Central Bank could push benchmark yields below recent ranges in the fourth quarter, according to Citigroup Inc. Strategists at the bank see the German 10-year yield falling to minus 0.6%, compared with the third-quarter average of minus 0.47%.

Uncertainty over the November U.S. election and a resurgence of the coronavirus should spur haven buying of bunds, adding downward pressure on yields, according to Citi.

chart: Germany's benchmark yield is set to fall to -0.6%, says Citigroup

© Bloomberg
Germany’s benchmark yield is set to fall to -0.6%, says Citigroup

Strategists Jamie Searle and Aman Bansal estimate monthly debt issuance this quarter by the German finance agency will average 10 billion euros ($12 billion), about 60% less versus the April-September period. That, coupled with central-bank buying under its pandemic debt-purchase program, will likely leave investors scrambling to get hold of the euro area’s safest asset.


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The ECB may extend its asset-buying program next year, while Germany’s self-imposed borrowing limits should be back in place by 2022 after a temporary relaxation due to the coronavirus pandemic — and that suggests “bund shortages look set to persist for years,” Searle and Bansal wrote in a note.

Bunds have remained supported in recent months by monetary easing in response to the pandemic’s economic impact, while gains have been capped without the immediate prospect of more interest-rate cuts. That narrowed last quarter’s trading range to the least on record.

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Euro-area bond sales are set to slow next week with Germany, Austria and Ireland offering securities totaling 6 billion euros, which would be the lowest weekly gross issuance so far this year, according to Commerzbank

The logo of Germany’s Federal Financial Supervisory Authority BaFin (Bundesanstalt fuer Finanzdienstleistungsaufsicht) is pictured outside of an office building of the BaFin in Bonn, Germany, April 15, 2019. REUTERS/Wolfgang Rattay

BERLIN (Reuters) – Germany’s financial watchdog BaFin is banning its staff from trading shares and other securities of the companies that it oversees in the wake of the Wirecard WDIG.DE accounting scandal, a senior finance ministry official told Reuters.

German regulatory officials bought and sold Wirecard shares in ever higher volumes as the payments company edged towards collapse, the German government has revealed, prompting criticism of the agency that polices finance.

Deputy finance minister Joerg Kukies said the aim was to restrict the trading activities of BaFin employees so that they can make decisions free of conflicts of interest.

“This is a good and necessary step,” Kukies said.

The finance ministry had disclosed that one fifth of BaFin staff had engaged in some kind of investment activity in 2019 and 2020, with an increasing interest in Wirecard in the months ahead of its collapse.

The ban affects not only shares, but also bonds and derivatives of the companies BaFin supervises, as well as all EU financial companies.

BaFin is overseen by the finance ministry.

Reporting by Christian Kraemer; Writing by Tom Sims; Editing by Angus MacSwan

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