German government bonds rose, with 10-year bunds advancing for a third day, after the World Bank cut its global-growth forecast and a slide in stocks spurred investors to seek safer assets.
Austrian and Dutch securities gained with other so-called semi-core securities amid concern the Federal Reserve is moving toward reducing its program of monetary stimulus, known as quantitative easing. Italian bonds rose as the nation sold 7.83 billion euros ($10.4 billion) of debt at a lower yield than in the secondary market before the auction. Spanish bonds also rallied while Greek securities gained for the first time in seven days.
“The risk-off tone is now to such an extent that we’re seeing falls in yields in the AAA regions,” said Elwin de Groot, senior market economist at Rabobank Nederland in Utrecht, the Netherlands. “Initially it was really the fear of QE tapering. Now it’s more the second-round effect of this volatility in the market. The fear is that this may also sap the economic recovery at some stage.”
The benchmark 10-year bund yield fell two basis points, or 0.02 percentage point, to 1.57 percent at 2:31 p.m. London time after falling to 1.55 percent earlier. The yield climbed to 1.66 percent on June 11, the highest level since Feb. 20. The 1.5 percent security due in May 2023 rose 0.17, or 1.70 per 1,000-euro face amount, to 99.395.
Austrian 10-year yields declined three basis points to 1.98 percent and similar-maturity Dutch rates dropped three basis points to 1.95 percent.