Government Bonds Surge as Italian, Irish Yields Drop to Records

European government bonds rose, with Italy’s two-year yields falling to a record, as euro-area output contracted for a 15th month in April, boosting speculation the region’s central bank will lower interest rates.

The yield on Italian 10-year government bonds fell below 4 percent for the first time in almost 2 1/2 years, while Spanish and Portuguese yields dropped to the least since 2010. Borrowing costs in France and Ireland declined to the lowest on record as a purchasing managers’ index showed German services and manufacturing unexpectedly shrank. Benchmark German 10-year bund yields slid to the lowest since July.