German Bonds Spurred by Stocks and Fed to 1st Weekly Drop in May

  • Europe’s benchmark securities follow Treasuries lower
  • Recovering oil and equity prices reduce demand for havens

German bonds posted their first week of declines this month as gains in stocks and commodities reduced demand for the safest government debt and speculation the Federal Reserve is getting ready to raise interest rates sent Treasuries sliding.

Yields on benchmark 10-year German bunds touched a two-week high Thursday, a day after the minutes of the Fed’s latest policy meeting sparked a jump in U.S. debt yields. Oil futures and the Stoxx Europe 600 Index both gained for a second week.

Markets have been focused on “the more-hawkish comments from the Fed than the market was prepared for,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen. “So we’ve seen U.S. yields back up and that’s had some spillover on German yields.”

The minutes of the April 26-27 Fed meeting released Wednesday signaled that a revival in U.S. growth and inflation might see officials support policy tightening in June, a view reiterated by New York Fed President William Dudley. Traders swiftly added to bets on an increase at the central bank’s next gathering -- a prospect that was all but dismissed at the start of the week.

German 10-year bund yields rose four basis points, or 0.04 percentage point, this week to 0.17 percent as of 4:38 p.m. in London, reaching as high as 0.21 percent on Thursday. The 0.5 percent security due in February 2026 fell 0.43, or 4.30 euros per 1,000-euro ($1,123) face amount, to 103.215.

Euro-area government bonds have returned 1 percent in the past three months while investors of U.S sovereign debt lost 0.1 percent, according to Bloomberg World Bond Indexes.

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