Belgium’s Bonds Lead Declines After Euro-Area Manufacturing Data

Belgium’s government bonds fell along with Austrian, Dutch and French securities as a gauge of growth in euro-area manufacturing stayed close to the highest level in almost three years in March.

Benchmark German bunds dropped for a third day before European Central Bank policy makers meet this week amid speculation they will stop short of implementing quantitative easing as they debate ways to combat slowing inflation. A report yesterday showed euro-region consumer prices grew 0.5 percent in the year through March, the lowest in four years. Separate data showed German unemployment dropped for a fourth month in March.

“Europe is doing much better than it was a year ago and this confirms the recovery is on track,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen. “Yields are grinding higher even though we saw the low print for inflation. I don’t think the ECB are going to do anything big, like QE, this week. They are going to save that for a rainier day.”

Belgium’s 10-year yield climbed two basis points, or 0.02 percentage point, to 2.24 percent at 4:09 p.m. London time. The 2.6 percent bond due in June 2024 fell 0.21, or 2.10 euros per 1,000-euro ($1,380), to 103.285.

Danske is one of three banks predicting the ECB will cut its key interest rate from a record-low 0.25 percent at the April 3 meeting, according to a Bloomberg News survey. The remaining 54 financial institutions forecast no change.

Output Slows

Austria’s 10-year yield gained three basis points to 1.84 percent. The rate on similar-maturity Dutch bonds increased three basis points to 1.94 percent and France’s climbed two basis points to 2.11 percent.

A manufacturing index based on a survey of euro-area purchasing managers slipped to 53.0 from 53.2 February, matching an initial estimate released last week. The index has been above 50, indicating expansion, since July and gauges for the region’s four largest economies all indicated growth.

German unemployment fell last month, with the number of people out of work dropping by a seasonally-adjusted 12,000 to 2.9 million. Separate data showed euro-area unemployment stayed at 11.9 percent in February, while Italy’s jobless rate rose to a record, highlighting the region’s uneven recovery.

Germany’s 10-year yield increased two basis points to 1.58 percent after rising three basis points in the prior two days.

The jobless rate in the 18-nation currency bloc was revised lower in January and in the prior two months from 12 percent, the European Union’s statistics office in Luxembourg said. Economists had forecast 12 percent for February, according to the median estimate in a Bloomberg survey. The Italian unemployment rate climbed to 13 percent from a revised 12.9 percent in January.

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

Greece’s 10-year yield dropped 10 basis points to 6.47 percent, the lowest since May 2010.

Before it's here, it's on the Bloomberg Terminal.