Germany’s 10-year government bonds rose, pushing yields down from the highest level in 17 months, as a U.S. labor-market report added to signs a global selloff in fixed-income securities was excessive.
Benchmark German bunds advanced for the first time in six days as data showed the U.S. economy added fewer jobs in August than analysts forecast, damping speculation the Federal Reserve will slow its asset-purchase program at this month’s policy meeting. Dutch, French and Italian bonds pared weekly declines after European Central Bank President Mario Draghi pledged yesterday to keep interest rates low. U.S. Treasury 10-year yields dropped from a two-year high.
“The lower-than-expected U.S. payroll numbers are a positive for bunds and Treasuries in the near term,” said Chiara Cremonesi, a fixed-income analyst at Unicredit SpA (UCG) in London. “It also increases the probability that the Fed might delay the tapering of asset purchases, which should trigger some further correction in bonds.”
Germany’s 10-year bund yield fell 10 basis points, or 0.1 percentage point, to 1.94 percent at 4:29 p.m. London time after reaching 2.05 percent, the highest since March 21, 2012. The 1.5 percent security due in May 2023 rose 0.835, or 8.35 euros per 1,000-euro ($1,317) face amount, to 96.115.
U.S. employers added 169,000 workers last month following a revised 104,000 reading in July that was smaller than initially estimated, Labor Department figures showed. The median forecast of 96 economists surveyed by Bloomberg called for an August increase of 180,000. The unemployment rate dropped to 7.3 percent, the lowest since December 2008.
The data come as Fed officials, who meet on Sept. 17-18, are debating whether the economy and job market have improved enough to warrant trimming monthly $85 billion bond purchases.
German industrial output fell 1.7 percent in July after rising 2 percent in June, a report from the Economics Ministry in Berlin showed today. The median estimate in a Bloomberg survey of economists was for a decline of 0.5 percent.
French 10-year bond yields fell eight basis points to 2.55 percent, paring their weekly increase to seven basis points. Dutch 10-year yields dropped nine basis points to 2.38 percent after reaching 2.47 percent, the highest since April 2012.
Euro-area government bonds dropped 2.1 percent in the past three months through yesterday, according to Bloomberg World Bond Indexes, partly as a reaction to the Fed’s plan to gradually withdraw stimulus from the U.S. economy. Benchmark Treasury 10-year yields topped 3 percent today for the first time in two years before dropping back to 2.90 percent.
German 10-year yields have increased more than 80 basis points from a record-low 1.127 percent set in June 2012 after the ECB’s pledge to buy the bonds of highly indebted nations damped demand for the safest assets and Europe’s economy emerged from recession in the second quarter of this year.
Spain’s 10-year bond yield dropped nine basis points today to 4.53 percent, while the rate on similar-maturity Italian debt declined five basis points to 4.50 percent.
Volatility on Finnish bonds was the highest in euro-area markets today followed by those of Germany and the Netherlands, according to measures of 10-year debt, the yield spread between two- and 10-year securities, and credit-default swaps.
Portugal’s 10-year bonds fell for a fourth day as Portuguese website Diario Economico reported representatives of the European Stability Mechanism will visit the nation for the eighth and ninth reviews of the country’s bailout program starting on Sept. 16.
Portuguese 10-year yields rose 11 basis points to 7.11 percent after touching 7.15 percent, the highest since July 18.
German bonds lost 3.1 percent this year through yesterday, according to Bloomberg World Bond Indexes. Italian securities returned 2.9 percent, while Spain’s earned 7.2 percent.