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German Notes Set for Weekly Drop Before Euro-Area Services Data

Germany’s two-year notes were poised for a second weekly decline before a report next week that economists said will show euro-area services output expanded for a fifth month in December.

Two-year yields climbed to the highest level in three months yesterday as investors weighed the prospects of the Federal Reserve cutting asset purchases as soon as this month. Markit Economics’ (PMITSEZ) index based on a survey of purchasing managers in the services industry rose to 51.4 from 51.2 in November, according to the median estimate in a Bloomberg News survey of analysts before the data is released on Dec. 16. A reading above 50 indicates expansion.

The yield on German two-year notes was little changed at 0.25 percent as of 7:22 a.m. in London after rising to 0.26 percent yesterday, matching the highest since Sept. 11. The rate has increased four basis points, or 0.04 percentage point, this week. The price of the zero percent security due in December 2015 was 99.50. Ten-year bunds yielded 1.83 percent.

German bonds lost 1.8 percent this year through yesterday, the worst performer of 15 euro-area debt markets tracked by Bloomberg World Bond Indexes. Spain’s returned 11 percent and Italy’s earned 7.5 percent.

To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net

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

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