German Bonds Decline as European Stocks Rally Saps Safety Demand

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Germany’s government bonds fell, with 10-year yields rising the most in six weeks, as a selloff in global equities sparked by China’s market rout eased.

Europe’s benchmark sovereign securities extended their decline after China cut its interest rates. French and Austrian bonds slid as an index of German business confidence unexpectedly rebounded in August. The Stoxx Europe 600 Index of shares rose after plunging the most since December 2008 on Monday.

“We have seen some stabilization in risk sentiment and equity markets have stabilized,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen.

Germany’s 10-year bund yields jumped 13 basis points, or 0.13 percentage point, to 0.72 percent as of 3:28 p.m. London time. That’s the biggest increase since July 10. The 1 percent security due August 2025 fell 1.285, or 12.85 euros per 1,000-euro ($1,146) face amount, to 102.65.

Yields on French 10-year bonds increased 13 basis points to 1.11 percent and those on similar-maturity Austrian debt climbed 13 basis points to 1.05 percent.

The extra yield, or spread, that investors get for holding Italian 10-year bonds instead of benchmark German bunds narrowed for the first time in more than a week. The spread shrank seven basis points to 124 basis points, after touching 138 on Monday, the widest since July 10.

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