European bonds rise as ECB buys debt; Greece leads stocks lower

By Emma O?Brien and Nick Gentle

European bonds rose as the region?s central bank began buying sovereign debt. Greece led declines in stocks while shares in emerging markets fell to a three-week low.

Yields on 10-year German bunds dropped four basis points to 0.35 percent at 6:25 a.m. in New York, and France?s slid to 0.64 percent. The Stoxx Europe 600 Index retreated 0.6 and Greece?s ASE index dropped 3 percent. Standard & Poor?s 500 Index futures lost 0.2 percent. The MSCI Emerging Markets Index declined 0.9 percent. Oil fell for a fourth day in London after China cut crude imports and U.S. natural gas slid on forecasts for warmer weather.

Anticipation of the European Central Bank?s 1.1 trillion- euro ($1.2 trillion) plan to fight deflation has fueled a bond rally that?s sent yields across the euro region to record lows. Greek stocks and bonds fell after European officials said the country?s latest proposals fell short of what was put forward two weeks ago and Greek ministers floated the prospect of a referendum.

?The QE purchases are having the expected effect and the market is very positive,? said Michael Leister, a senior rates strategist at Commerzbank AG in Frankfurt. ?In the core we?re seeing yields dropping sharply lower led by the ultra-long end so these are very much QE style moves.?

Italy?s 10-year yields dropped three basis points to 1.29 percent and Spain?s yields declined two basis points to 1.28 percent, while Portugal?s was little changed at 1.75 percent.

The ECB and Eurosystem national central banks have started purchases under the Public Sector Purchase Programme, the ECB said in a Twitter post.

Yields on German notes as far out as six years were already below zero and France?s two-, three- and...