Government bond yields in Germany, the euro zone's benchmark bond issuer, have been whipsawed by turmoil in the banking sector following the collapse of U.S. lender Silicon Valley Bank and a rout in Credit Suisse shares. Demand for quality assets and risk-off sentiment had led to increased activity in German bonds, Germany's debt agency said.
"The market for German government securities is functioning well," a spokeswoman said in an email to Reuters.
Current market volatility could affect debt issuance and banks, who buy governments' debts at auctions and trade it in the secondary market, may adjust their bidding volumes and bidding prices to reflect the volatility, she said.
"In the secondary market the ability for intermediaries providing tight bid and offer prices for bonds may be limited compared to times with lower volatility," she added. Trading in some of the world's biggest bond markets has become more challenging and those spreads have widened given heightened volatility in the past week, investors and traders say.
(Reporting by Dhara Ranasinghe; editing by Yoruk Bahceli)
