German Bonds Drop First Time in Four Days Before Confidence Data

Germany’s government bonds fell for the first time in four days before an industry report that economists said will show investor confidence improved in January, damping demand for the region’s safest assets.

Benchmark 10-year yields climbed from near the lowest level in seven weeks amid speculation the euro-area economy is gaining momentum. Austrian, Belgian and Dutch securities also declined. Irish 10-year bonds rose for a fifth day after Moody’s Investors Service upgraded the nation’s credit rating to investment grade last week. Spain is scheduled to sell bills today.

“We could be due a pullback in core bonds given how much yields have come back in the last couple of weeks,” said Owen Callan, an analyst at Danske Bank A/S in Dublin. “We look for a continued uptick in the ZEW survey, in line with the slow improvement in data that we are seeing.”

Germany’s 10-year yield rose one basis point, or 0.01 percentage point, to 1.75 percent at 8:34 a.m. London time after falling to 1.73 percent yesterday, the lowest since Dec. 3. The 2 percent bund due in August 2023 dropped 0.08, or 80 euro cents per 1,000-euro ($1,354) face amount, to 102.175.

The ZEW Center for European Economic Research in Mannheim will say its index of investor and analyst expectations climbed to 64 this month, the highest level since February 2006, from 62 in December, according to the median estimate in a Bloomberg News survey of economists.

Irish 10-year yields declined four basis points to 3.21 percent, the lowest level since October 2005.

German bonds returned 0.2 percent in the 12 months through yesterday, the worst performer of 15 euro-area debt markets tracked by Bloomberg World Bond Indexes. Spain’s rose 13 percent and Italy’s gained 7.2 percent.

To contact the reporters on this story: Neal Armstrong in London at narmstrong8@bloomberg.net; Eshe Nelson in London at enelson32@bloomberg.net

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

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