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Bunds Gain First Month Since July on Jobs Data

Germany’s 10-year bonds advanced for the first month since July after a report showed the jobless rate in the euro area climbed to a record in October, indicating the region is struggling to boost growth.

Austrian and Belgian 10-year yields fell, extending records for a third day, as separate data showed inflation in the common-currency region slowed for a second month in November. Spanish 10-year bonds posted a third monthly gain after a Greek aid agreement this week helped push yields to the lowest since March yesterday. The benchmark German bund yield was four basis points from its lowest since Nov. 20.

“The announcements we’ve had on the euro zone have been relatively constructive but at the same time there’s evidence that the economic situation is deteriorating,” said Patrick Jacq, a senior fixed-income strategist at BNP Paribas SA in Paris. “This is dragging core yields down,” he said, referring to the region’s highest-rated securities.

The German 10-year yield rose two basis points, or 0.02 percentage point, to 1.39 percent at 4:41 p.m. London time, set for a seven basis-point slide since the end of October. It reached 1.35 percent two days ago, the lowest since Nov. 20. The 1.5 percent bond due September 2022 lost 0.18, or 1.80 euros per 1,000-euro ($1,300) face amount, to 101.03.

Ten-year bund yields may fall toward 1.20 percent in the first quarter of 2013, Jacq said.

Bunds Climbed

German securities climbed this week as reports signaling Europe’s recession is deepening countered finance ministers’ Nov. 27 agreement to ease the terms of Greece’s bailout.

Unemployment in the 17-nation region rose to 11.7 percent from 11.6 percent in September, the European Union’s statistics office in Luxembourg said today. The inflation rate fell to 2.2 percent from 2.5 percent in October. That’s less than the median forecast of 2.4 percent in a Bloomberg News survey of 38 economists.

Spanish 10-year bond yields fell three basis points to 5.31 percent today, having dropped 30 basis points this month and yesterday touching the lowest level since March 20. The rate earlier climbed as much as seven basis points to 5.41 percent.

“An ongoing drip feed of negative macro data certainly is a potential trigger” for investors to sell Spanish bonds, said Richard McGuire, a senior rates strategist at Rabobank International in London.

Similar-maturity Italian bond yields fell six basis points to 4.50 percent. They dropped to 4.47 percent yesterday, the least in almost two years.

Core Countries

Austria’s 10-year rate reached 1.732 percent and Belgium’s fell to 2.15 percent, the lowest levels since Bloomberg began collecting the data in 1993.

“In the core countries, the Austrias, the Belgiums, there’s not that much juice left to be squeezed out of those oranges,” Andrew Bosomworth, managing director at Pimco, which runs the world’s biggest bond fund, told Mark Barton on Bloomberg Television’s “Countdown” in Frankfurt.

Volatility on Greek bonds was the highest in developed markets today, followed by those of Switzerland, according to measures of 10-year or equivalent-maturity debt, the spread between two- and 10-year securities, and credit default swaps.

The rate on Greek debt due February 2023 fell 19 basis points to 16.129 percent, with the price rising to 35.275 percent of face value.

German bonds returned 3.8 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish debt gained 5.1 percent and Italy’s earned 20 percent.

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