Bunds Decline as China Slowdown Spurs Central Bank Speculation

German government bonds fell, with 10-year yields rising toward the highest in a month, amid speculation central banks will step in to stimulate growth after China’s inflation and industrial production slowed.

Two-year notes also declined as European stocks advanced. Spain and Italy’s credit ratings were downgraded yesterday by DBRS Inc., which cited a weakening growth outlook in the countries and deteriorating funding conditions. DBRS is one of the four companies accepted by the European Central Bank to rate the securities it takes as collateral.

The German 10-year yield rose three basis points, or 0.03 percentage point, to 1.45 percent at 8:02 a.m. London time after rising to 1.49 percent on Aug. 7, the highest level since July 4. The 1.75 percent bond due in July 2022 fell 0.275, or 2.75 euros per 1,000-euro face amount, to 102.735.

The two-year yield climbed one basis point to minus 0.04 percent. It dropped to minus 0.097 percent on Aug. 2, the lowest since Bloomberg began tracking the securities in 1990.

The Stoxx Europe 600 Index of shares gained 0.4 percent.

German debt returned 3.3 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish securities fell 4.3 percent and Italy’s debt rose 9.6 percent.

To contact the reporters on this story: Lucy Meakin in London at lmeakin1@bloomberg.net; Keith Jenkins in London at kjenkins3@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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