Bunds Drop as Fed Stimulus, German Court Ruling Damp Safety Bid

German 10-year government bonds dropped for a second week, with the yield climbing to the most since April, after the Federal Reserve announced a third round of asset purchases to stimulate the U.S. economy.

The declines pushed two-year note yields to the highest level in more than two months as investors reduced holdings of the safest assets. Italian bonds led gains among the so-called euro-area periphery nations, rising relative to bunds, as Germany’s Constitutional Court cleared the way for the setup of Europe’s permanent bailout fund. The yield on German 10-year bunds yesterday climbed the most since Aug. 3 as euro-area finance ministers met in Cyprus.