Bunds rout extends on recovery signs as investors wait on Greece

By Lukanyo Mnyanda

Germany?s government bonds fell, extending a rout that pushed 10-year yields up last week by the most since 1998 amid an economic recovery that?s gathering pace.

In a sign of limited contagion from Greece?s divisions with creditors, a slide in that nation?s bonds hasn?t been enough to boost German bunds, which are perceived to be a haven. Declines by Italian securities earlier on Monday pushed the 10-year yield to the highest level since November. Industrial output in Europe?s largest economy rose in April more than analysts predicted and exports jumped the most this year, separate reports showed.

?Bunds looks set to remain on a slippery slope with upbeat macro data compounding the impact of self-feeding volatility,? Michael Leister, a senior rates strategist at Commerzbank AG in Frankfurt, wrote in a note to clients. ?Peripherals look unlikely to benefit materially from struggling bunds as risk- taking capacity remains subdued and Greece unresolved.?

The yield on German 10-year bunds rose two basis points, or 0.02 percentage point, to 0.87 percent as of 10:51 a.m. London time. The 0.5 percent security due in February 2025 declined 0.2, or 2 euros per 1,000-euro ($1,113) face amount, to 96.61. The yield jumped 36 basis points last week, the biggest increase since October 1998.

Italy?s 10-year bond yield was little changed at 2.23 percent after climbing to 2.30 percent, the highest since Nov. 20. The yield on similar-maturity Spanish bonds was 2.21 percent, having earlier touched 2.27 percent, the most since Oct. 21.

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