Nov. 11 (Bloomberg) -- European government bonds were little changed as Germany auctioned 5 billion euros ($7.5 billion) of bunds and stocks rose, eroding demand for the safety of fixed-income assets.

The yield on the benchmark 10-year bund earlier advanced to within half a basis point of the highest level since Sept. 23, as the MSCI World Index of shares gained as much as 1.1 percent. Credit Agricole SA, France’s third-largest bank, posted better- than-forecast earnings and China reported rising industrial production in October.

“Stocks may have got a little bit ahead of the data, so 10-year bund yields should be able to hold their current levels,” said John Davies, a fixed-income strategist in London at WestLB AG.

The yield on the 10-year bund was little changed at 3.34 percent as of 4:24 p.m. in London, after earlier rising to 3.39 percent. The 3.25 percent security due January 2020, fell 0.01, or 10 euro cents per 1,000-euro face amount, to 99.25.

Bonds were little changed across Europe, with the French 10-year yield falling 1 basis point to 3.55 percent, and the Spanish 10-year bond yield also dropping 1 basis point, to 3.80 percent.

Germany plans to sell a record 329 billion euros of bonds and bills this year, up from 220 billion euros in 2008, as it seeks to fund stimulus programs to help boost growth.

Demand at the German auction was 1.4 times greater than the amount of securities offered, compared with an average of 1.6 at the previous three sales. Portugal sold 1-billion euros of 3.6 percent notes maturing in 2014 today, with a so-called bid-to- cover ratio of 3.4.

Exiting Recession

German 10-year bonds posted their fourth weekly decline in five last week after the European Central Bank policy makers said they may start withdrawing some measures they’d used to boost growth. Europe’s largest economy exited recession in the second quarter along with France, while the euro-region is expected to post third-quarter growth in a report due Nov. 13.

Most EU member states should start withdrawing stimulus measures from 2011, European Union Economic Affairs Commissioner Joaquin Almunia said today. The Czech Republic, Slovakia and Slovenia have until 2013 to trim their budget deficits to below 3 percent of gross domestic product, the EU said in deficit reports issued today in Brussels.

Greek Reforms

Spain, Ireland and the U.K. have adopted “effective action” to counter budget deficits and rising state debt, while recommendations were not “adequately applied” in Greece, Almunia said.

“Greece needs very crucial institutional reforms,” Almunia said. Greece has taken “no effective action” to cut its shortfall, set to be 12.7 percent of gross domestic product this year, the commission said. The EU deficit limit is 3 percent.

The yield on the Greek 10-year note fell 1 basis point to 4.65 percent.

German government bonds have lost investors 0.01 percent since the beginning of October, compared with a 0.3 percent loss for U.S. Treasuries and 1.3 percent for U.K. gilts, according to Merrill Lynch & Co. indexes.

To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net

Last Updated: November 11, 2009 11:58 EST