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German Bonds Drop With Belgium’s Before Euro-Area Data This Week

German government bonds fell for the first time in three days before euro-area manufacturing and confidence reports this week that economists said will add to signs of recovery, damping demand for safer assets.

Belgian and Dutch securities also declined before the publication of a delayed U.S. jobs report tomorrow that analysts say will show employment in the world’s biggest economy increased last month. Italian bonds dropped for the first time in eight days after 10-year yields dropped to the least since August. France auctioned 7.25 billion euros ($9.91 billion) of bills maturing in three, five and 12 months.

“People will be waiting for U.S. data and important euro-zone data scheduled for coming days,” said Luca Cazzulani, a senior fixed-income strategist at UniCredit SpA (UCG) in Milan. “We should get improving data in the euro zone but I don’t think this will be enough to send yields up. There are still a lot of sources of uncertainty around.”

Germany’s 10-year yield increased two basis points, or 0.02 percentage point, to 1.85 percent at 4:41 p.m. London time after dropping to 1.82 percent on Oct. 18, the lowest level since Oct. 9. The 2 percent bund maturing in August 2023 fell 0.135, or 1.35 euros per 1,000-euro face amount, to 101.365.

UniCredit may lower its year-end bund yield forecast from 2 percent because the U.S. government shutdown earlier this month has made it less likely the Federal Reserve will cut asset purchases, Cazzulani said. The benchmark German yield will end 2013 at 1.93 percent, according to the median estimate in a Bloomberg News survey.

Belgian 10-year yields rose three basis points to 2.62 percent and similar-maturity Dutch rates climbed two basis points to 2.21 percent.

Most Volatile

Volatility on Germany’s bonds was the highest in euro-area markets today, followed by those of Austria and Belgium, according to measures of 10-year debt, the yield spread between two- and 10-year securities and credit-default swaps.

U.S. employers added 180,000 workers in September, the most since April, economists surveyed by Bloomberg predict. The data was originally scheduled to be released on Oct. 4.

An index of euro-area household confidence rose to minus 14.5 this month, the highest since July 2011, a separate Bloomberg survey showed before the data is released on Wednesday. A composite gauge based on a survey of purchasing managers in services and manufacturing industries increased to 52.4 from 52.2 in September, a separate Bloomberg survey shows.

Italian Bonds

Italy’s 10-year yield climbed three basis points to 4.19 percent after falling to 4.16 percent, the lowest since Aug. 13.

Former Italian Prime Minister Mario Monti, who imposed austerity on the nation in 2011, quit the leadership of his political party last week after criticizing the policies of his successor, Prime Minister Enrico Letta.

“There are still a lot of tensions within the Italian government,” said Felix Herrmann, a Frankfurt-based research analyst at DZ Bank AG. “This is certainly one aspect why BTPs are still under pressure,” he said, referring to Italian government bonds.

French 10-year yields rose one basis point to 2.36 percent after today’s bill sales.

The Netherlands auctioned 3.4 billion euros of 100- and 188-day securities.

German bonds handed investors a loss of 1.8 percent this year through Oct. 18, according to Bloomberg World Bond Indexes. French securities dropped 0.8 percent and Dutch bonds declined 2.1 percent.

To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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