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German yields rise from 3-month low as Greek bonds jump on PMIs

By David Goodman & Lucy Meakin

Germany’s two-year note yield climbed from near the lowest in almost three months as data showed factory output in the euro area increased more than initially reported in January, damping demand for the safest assets.

Greek bonds advanced after a separate purchasing managers’ index showed the nation’s manufacturing industries expanded for the first time in 4 1/2 years last month. Yields on Italian and Spanish two-year securities fell to record lows. German bonds climbed last week amid speculation slowing inflation will prompt the European Central Bank will take more measures to stimulate the region’s economy at a policy meeting on Thursday.

“Across the board, they were pretty solid,” Owen Callan, an analyst at Danske Bank A/S in Dublin said, referring to the manufacturing gauges. “It supports the view that the euro zone recovery is still in place. If you were looking for the ECB to cut rates this week then this data doesn’t help that cause.”

Germany’s two-year yield climbed one basis point, or 0.01 percentage point, to 0.08 percent at 10:19 a.m. London time, after dropping to 0.06 percent on Jan. 31, the lowest since Nov. 7. The price of the zero percent note maturing in December 2015 fell 0.02, or 20 euro cents per 1,000-euro ($1,351) face-amount, to 99.855. The 10-year rate was at 1.66 percent.

An index based on a survey of purchasing managers in the euro bloc’s manufacturing industry increased to 54 last month from 52.7 in December, London-based Markit Economics said. That’s the highest since May 2011 and exceeded a Jan. 23 preliminary estimate of 53.9. A reading above 50 indicates growth.

A similar report for Greece’s manufacturing industry showed a reading of 51.2, the first reading above 50 since August 2009, according to Markit.

The yield on Greek 10-year bonds fell 14 basis points to 8.47 percent. The rate on similar-maturity Portuguese debt dropped to 4.93 percent, the lowest since June 2010.

German Finance Minister Wolfgang Schaeuble is planning additional financial aid for Greece, Der Spiegel magazine reported, quoting a Finance Ministry position paper. “There is no update,” Marco Semmelmann, a spokesman at the Finance Ministry, said by phone. “What the minister has repeatedly said still applies.”

Italian two-year yields fell four basis points to 0.89 percent, the lowest since Bloomberg started tracking the data in 1993. The rate on similar-maturity Spanish notes slipped to as low as 0.94 percent, also the least on record.

Germany’s five-year note yielded 0.66 percent after the rate slid to 0.64 percent on Jan. 31, the least since Nov. 21. The nation is scheduled to auction 4 billion euros of notes maturing in February 2019 on Feb. 5.

German bonds returned 2.1 percent this year through Jan. 31, Bloomberg World Bond Indexes show. Spain’s earned 2.9 percent and Italy’s gained 2.2 percent.

[Bloomberg]

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