- Stretch of gains by French bonds the longest since Dec. 2014
- Two-year government note yield drops to a record low
French and German government bonds advanced for a sixth day amid speculation that the European Central Bank will expand monetary stimulus at its meeting next month.
Benchmark German 10-year bonds rose with Treasuries as a report showed a U.S. manufacturing index fell more than economists estimated, showing global growth remains subdued. The securities swung between gains and losses for much of the day as investors assessed the long-term impact of Friday’s terror attacks in Paris.
The attacks were not a reason “to change the way we see the evolution of the European economy,” ECB Executive Board member Peter Praet said. The decline in French 10-year yields was the longest since 2014. Spanish and Italian bonds fell amid elevated stock-market volatility.
“The U.S. manufacturing survey was disappointing, providing some support for euro-area government bonds as investors digest Friday’s events in Paris,” said Nick Stamenkovic, a fixed income strategist at RIA Capital Markets Ltd. in Edinburgh. “As stocks fell and volatility as measured by VIX rose, demand for risk assets, including peripheral debts, weakened.”
French 10-year bond yields fell two basis points, or 0.02 percentage point, to 0.85 percent as of 4:51 p.m. London time, having earlier risen by as much as two basis points. The yield dropped 15 basis points last week. The 1 percent security due in November 2025 climbed 0.21, or 2.10 euros per 1,000-euro ($1,070) face amount, to 101.415.
The yield on German 10-year bunds dropped three basis points to 0.53 percent, after earlier being as high as 0.57 percent. Italian bonds halted a five-day gain, with 10-year yields at 1.57 percent, while that on their Spanish counterparts with a similar due date was one basis point higher at 1.80 percent.
Investors in euro-area bonds have been supporting the debt amid speculation that the ECB will expand stimulus to help counter slower economic growth and low inflation. Consumer-price growth rose 0.1 percent in the euro-area last month, more than the stagnation forecast by economists in a Bloomberg survey.
The VIX Index of U.S. stock-market volatility was at 19.69 percent on Monday, after reaching 20.67 percent on Nov. 13, the most since Oct. 2.