Bloomberg News

German Bonds Drop as Stocks Rally After ECB Lending Report

October 26, 2011

Oct. 26 (Bloomberg) -- German 10-year government bonds fell, paring yesterday gain, as stocks rose and year-long loans from the European Central Bank attracted less demand than some analysts predicted.

Italian two-year notes erased their decline after the country sold 10.5 billion euros ($14.6 billion) of bills and bonds. The benchmark Stoxx Europe 600 Index increased 0.2 percent, after falling 0.7 percent yesterday. The Frankfurt- based ECB said today it will lend banks 56.9 billion euros for 12 months, less than the median forecast of 70 billion euros in a Bloomberg News survey of 10 analysts.

The German 10-year yield increased three basis points, or 0.03 percentage point, to 2.09 percent at 11:14 a.m. London time. The 2.25 percent security due September 2021 fell 0.28, or 2.8 euros per 1,000-euro face amount, to 101.405. Two-year yields were little changed at 0.56 percent, after falling earlier to 0.52 percent, the least since Oct. 6.

Italy’s bonds fell earlier after la Repubblica newspaper reported that Prime Minister Silvio Berlusconi agreed to step down by January and to bring elections forward to 2012. The yield on Italy’s two-year note yield was little changed at 4.51 percent, after rising to 4.60 percent.

German bonds have returned 7 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. French debt gained 2.9 percent. Italian bonds lost 4.1 percent, even as the European Central Bank was said to buy the securities.

--Editors: Matthew Brown, Nicholas Reynolds

To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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