ECONOMY

German bunds rise on sata seen adding to gloom; Greek bonds gain

German government bonds rose for the first time in three days before reports that economists said will add to signs Europe’s economic recovery is grinding to a halt, boosting demand for fixed-income assets.

Dutch, French and Finnish bonds also advanced as investors favored the region’s safest securities. Italian and Spanish debt underperformed their German peers even as the slowdown boosts speculation the European Central Bank will begin buying bonds in a quantitative easing program. European leaders will gather in Brussels this week to discuss the euro area’s stumbling economy. Greek bonds climbed for a second day, paring losses that sparked a selloff in the periphery last week.

“There are these recession fears that have increased and seem to outweigh the positive QE effect,” said Daniel Lenz, lead market strategist for the euro area at DZ Bank AG in Frankfurt. “Therefore we have a typical risk-off sentiment with liquidity flowing into safe havens.”

Germany’s benchmark 10-year yield slipped two basis points, or 0.02 percentage point, to 0.84 percent at 10:38 a.m. London time after reaching 0.715 percent on Oct. 16, the lowest since Bloomberg started collecting the data in 1989. The 1 percent bund due in August 2024 rose 0.165, or 1.65 euros per 1,000-euro ($1,276) face amount, to 101.49.

France’s 10-year yield fell two basis points to 1.28 percent. That on similar-maturity Dutch debt also dropped two basis points, to 1.02 percent, and the Finnish rate was two basis points lower at 1.02 percent. Italy’s 10-year yield rose one basis point to 2.50 percent and Spain’s increased one basis point to 2.18 percent.

Greek bonds rose as Prime Minister Antonis Samaras said the nation is negotiating a possible precautionary credit line that would be available if borrowing costs surged. The 10-year yield fell 11 basis points to 7.96 percent after climbing 147 basis points last week.

German government securities returned 7.9 percent this year through Oct. 17, Bloomberg World Bond Indexes show. Spain’s returned 13 percent and Italy’s made 11 percent.

[Bloomberg]