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German Yields Rise From 3-Month Low as Greek Bonds Jump on PMIs

Feb. 3 (Bloomberg) -- Germany’s two-year note yield climbed from near the lowest in almost three months as data showed factory output in the euro area increased more than initially reported in January, damping demand for the safest assets.

Greek bonds advanced after a separate purchasing managers’ index showed the nation’s manufacturing industries expanded for the first time in 4 1/2 years last month. Yields on Italian and Spanish two-year securities fell to record lows. German bonds climbed last week amid speculation slowing inflation will prompt the European Central Bank will take more measures to stimulate the region’s economy at a policy meeting on Thursday.

“Across the board, they were pretty solid,” Owen Callan, an analyst at Danske Bank A/S in Dublin said, referring to the manufacturing gauges. “It supports the view that the euro-zone recovery is still in place. If you were looking for the ECB to cut rates this week then this data doesn’t help that cause.”

Germany’s two-year yield rose one basis point, or 0.01 percentage point, to 0.08 percent at 4:34 p.m. London time after dropping to 0.06 percent on Jan. 31, the lowest since Nov. 7. The zero percent note maturing in December 2015 dropped 0.02, or 20 euro cents per 1,000-euro ($1,353) face-amount, to 99.855.

The 10-year rate fell one basis point to 1.65 percent after a private report showed U.S. manufacturing slowed more than economists forecast in January.

Output Increases

An index based on a survey of purchasing managers in the euro bloc’s manufacturing industry increased to 54 last month from 52.7 in December, London-based Markit Economics said. That’s the highest since May 2011 and exceeded a Jan. 23 preliminary estimate of 53.9. A reading above 50 indicates growth.

A similar report for Greece’s manufacturing industry showed a reading of 51.2, the first reading above 50 since August 2009, according to Markit.

The yield on Greek 10-year bonds fell 26 basis points to 8.36 percent. The rate on similar-maturity Portuguese debt dropped to 4.915 percent, the lowest since June 2010.

German Finance Minister Wolfgang Schaeuble is planning additional financial aid for Greece, Der Spiegel magazine reported, quoting a Finance Ministry position paper. “There is no update,” Marco Semmelmann, a spokesman at the Finance Ministry, said by phone. “What the minister has repeatedly said still applies.”

Italian two-year yields fell as much as five basis points to 0.875 percent, the lowest since Bloomberg started tracking the data in 1993. The rate on similar-maturity Spanish notes slipped to as low as 0.918 percent, also the least on record.

Germany’s five-year note yielded 0.66 percent after the rate slid to 0.64 percent on Jan. 31, the least since Nov. 21. The nation is scheduled to auction 4 billion euros of notes maturing in February 2019 on Feb. 5.

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

Finland’s 10-year yield was little changed at 1.76 percent.

German bonds returned 2.1 percent this year through Jan. 31, Bloomberg World Bond Indexes show. Spain’s earned 2.9 percent and Italy’s gained 2.2 percent.

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