London : German bonds declined for the first week in five after European governments announced an unprecedented bailout package aimed at preventing the sovereign-debt crisis from spreading.
The extra yield that investors demand for holding 10-year bonds from Greece and Portugal instead of bunds slid after national central banks bought securities from the region's most indebted nations as part of the rescue plan. A report on May 12 showed the German economy unexpectedly grew in the first three months of the year.
Sharp reversal
"The bailout package resulted in sharp reversal of peripheral bonds at the expense of German debt last week," said Nicholas Stamenkovic, a fixed-income strategist at RIA Capital Markets Ltd in Edinburgh, a broker for banks and investors. "It helped to improve sentiment, but clearly there're still a lot of nerves in the market. Bonds from Greece remain vulnerable."
The 10-year German bund yield rose 6 basis points in the week to 2.86 per cent in London on Friday. It reached 3.01 per cent on May 5.
Greek bonds rose for the first time in six weeks. Ten-year bond yields fell 440 basis points to 8.24 per cent.
The yield difference between the securities and bunds slid to 516 basis points from 965 basis points.
The Portuguese 10-year bond yield difference fell to 174 basis points from 349 basis points. Concern Greece would struggle to pay its debt helped send its bond yields soaring and precipitated a 14-per cent decline in the euro this year.
European governments unveiled a rescue package worth almost $1 trillion this week after previous attempts to calm markets failed.
