Germany’s 10-year bonds decline before euro-area inflation data

By Lucy Meakin

Germany’s government bonds fell before a report economists said will show the euro-area inflation rate stayed near a five-year low this month.

Price gains that have been less than the European Central Bank’s goal of just below two percent since early 2013 are adding to pressure on the ECB to extend its asset-purchase program. Benchmark German 10-year yields dropped the most in two weeks Thursday after data showed consumer-price growth in Europe’s biggest economy unexpectedly slowed to 0.7 percent in October from a year earlier.

German 10-year yields rose three basis points, or 0.03 percentage point, to 0.87 percent at 7:28 a.m. London time. The rate dropped five basis points on Thursday, the steepest decline since Oct. 15. The 1 percent bund due in August 2024 fell 0.26, or 2.60 euros per 1,000-euro ($1,255) face amount, to 101.185.

Consumer prices in the 18-member currency bloc rose an annualized 0.4 percent in October, up from 0.3 percent a month earlier, according to the median estimate of analysts in a Bloomberg News survey.

A separate report showed German retail sales fell more in September than economists forecast. Sales dropped 3.2 percent from August, when they increased a revised 1.5 percent, the Federal Statistics Office in Wiesbaden said on Friday.

German securities returned 2.4 percent in the three months through Thursday according to Bloomberg World Bond Indexes. Spain’s also earned 2.4 percent and Italy’s gained 1.3 percent, the worst performer among euro-area sovereign debt markets after Greece, which lost 15 percent. [Bloomberg]