German bunds led declines in European government securities as gains in stocks and a report showing exports from the region’s largest economy improved in March reduced demand for fixed-income assets.
German 10-year yields climbed to the highest level in six weeks while those on French and Dutch bonds also increased after Federal Reserve Bank of Chicago President Charles Evans said yesterday the U.S. job market is “doing better.” The Federal Reserve, Bank of Japan and other central banks are pumping cash into their economies or cutting interest rates, encouraging investors to seek higher-yielding assets such as equities. Italy sold 10 billion euros ($13 billion) of bills.
“European bond markets seem to be following the move in the U.S.,” said Michael Markovich, head of global interest-rate strategy at Credit Suisse AG on Zurich. “We are going back to more sustainable German yield levels. There is some more room for higher yields in Germany.”
Germany’s 10-year yield climbed 11 basis points, or 0.11 percentage point, to 1.38 percent at 4:32 p.m. London time after rising to 1.39 percent, the highest since March 25. The 1.5 percent bund due in February 2023 fell 1.005, or 10.05 euros per 1,000-euro face amount, to 101.095. The yield has increased 14 basis points this week, the most since Jan. 4.
French 10-year yields rose 12 basis points today to 1.96 percent, while similar-maturity rates in the Netherlands increased 10 basis points to 1.70 percent and those in Austria also climbed 10 basis points to 1.77 percent.
German exports rose 0.5 percent in March after falling a revised 1.2 percent the previous month, the Federal Statistics Office said. Imports increased 0.8 percent. Data on May 8 showed industrial production in Europe’s largest economy unexpectedly increased in the same month. The Stoxx Euro 600 Index of shares advanced for a fourth day.
U.S. Treasuries fell for a second day as the Chicago Fed’s Evans said record stimulus had helped boost the job market.
“During the time that we’ve been doing our asset-purchase program, the labor market has improved, definitely,” he said yesterday in an interview with Michael McKee on Bloomberg Television. Fed Bank of Philadelphia President Charles Plosser told reporters in New York he would favor reducing the pace of the Fed’s $85 billion monthly bond purchases next month.
Italy’s Treasury sold 7 billion euros of 365-day bills at a record-low 0.703 percent, down from 0.922 percent at the previous auction on April 10. Investors bid for 1.16 times the amount offered, down from 1.64 times last month. The government also sold 3 billion euros of 219-day bills at 0.393 percent.
The auction comes one day after Prime Minister Enrico Letta’s new government confirmed its intention to postpone the payment of a property tax due in June as consumer spending slumps and joblessness remains near a 20-year high.
Italian 10-year yields increased one basis point to 3.90 percent after falling to 3.68 percent on May 3, the lowest level since February 2006. Spain’s 10-year rate climbed two basis points to 4.21 percent.
Volatility on French bonds was the highest in euro-area markets today followed by those of Belgium and Finland, according to measures of 10-year debt, the yield spread between two- and 10-year securities, and credit-default swaps.
German bunds dropped 0.4 percent this month through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. French securities fell 0.1 percent and Italy’s returned 0.4 percent.