German 10-Year Bunds Decline as U.S. Companies Add More Jobs Than Forecast
German bunds fell, pushing the 10- year yield to the highest level in three weeks, after a report showing better-than-expected U.S. job growth and recovering stock markets reduced the haven appeal of government debt.
Thirty-year bond yields, which reached record lows last month, also declined. Private payrolls that exclude government agencies climbed 67,000, compared with the median estimate of economists surveyed by Bloomberg News which called for a gain of 40,000. European data showed services and manufacturing growth slowed less than previously estimated in August.
“In itself, this is weak data, but bond yields are pushing higher because the market expected something much worse,” said Christoph Rieger, head of fixed-income strategy at Commerzbank AG in Frankfurt. “Yields are at extreme levels. The market will need really bad reports to push them lower from here.”
German 10-year bund yields climbed seven basis points to 2.36 percent as of 4:38 p.m. in London, after rising to 2.37 percent, the highest since Aug. 19. The 2.25 percent securities due September 2020 fell 0.655, or 6.55 euros per 1,000-euro ($1,284) face amount, to 99.055. Two-year yields increased three basis points to 0.65 percent and 30-year yields added 10 basis points to 2.97 percent.
The Stoxx Europe 600 Index and the MSCI World Index added 0.8 percent.
German 10- and 30-year bonds posted their first decline in six weeks after manufacturing data from the U.S. and China that beat economist predictions calmed concern that the global recovery is faltering. Ten-year yields climbed 15 basis points during the week, while 30-year yields were 27 basis points higher.
Economic Growth
The euro-region economy will grow between 1.4 percent and 1.8 percent this year, compared with a previous forecast of 0.7 percent to 1.3 percent, European Central Bank President Jean- Claude Trichet said yesterday. Growth will be between 0.5 percent and 2.3 percent in 2011, he said, revising a previous estimate of 0.2 percent to 2.2 percent. Policy makers extended emergency lending measures for banks into 2011 and held the key interest rate at a record low of 1 percent.
A composite index based on a survey of euro-area purchasing managers in service and manufacturing industries declined to 56.2 from 56.7 in July, London-based Markit Economics said today. That’s above an initial estimate of 56.1 published on Aug. 23. A reading above 50 indicates expansion.
Retail sales in the 16-nation euro area advanced 0.1 percent from June, when they gained 0.2 percent, the European Union’s statistics office in Luxembourg said today. Economists had forecast a gain of 0.2 percent.
‘Melted Away’
Bunds, U.S. Treasuries and U.K. gilts rallied last month on mounting evidence that America’s economic recovery is faltering. The U.S. economy grew at an annual 1.6 percent pace in the second quarter, according to an Aug. 27 report, down from an earlier estimate of 2.4 percent.
“Risk aversion seems to have melted away in the last couple of sessions, at least for the bond markets,” European fixed-income strategists led by Nick Firoozye in London wrote in a research report today. “We still see a slowing U.S. recovery, but the extent to which this is translated into yield levels may be facing more resistance at this stage, given the more robust recovery in the euro area.”
Most so-called peripheral euro-region bonds advanced relative to benchmark German bunds. The yield spread between Spanish and German 10-year bonds narrowed six basis points to 167 basis points, while the Irish-German spread declined three basis points to 339 basis points.
To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Matthew Brown in London at mbrown42@bloomberg.net
Rate These Stories
Rate this Page