Frankfurt: German 30-year government bond yields fell the most in 19 months, dropping to a record low on signs the European Central Bank will hold rates lower for longer.
Ten-year bond yields also declined to a record as Europe's benchmark government securities rose for a fourth-straight week.
European Central Bank council member Axel Weber said policy makers should wait until the first quarter before deciding when to withdraw emergency lending measures. Reports showed the US economy is cooling while both America and Germany said debt sales are slowing.
"The trend of more uncertainty over the global outlook continues," said Peter Chatwell, an interest-rate strategist at Credit Agricole Corporate & Investment Bank in London.
The 30-year yields fell 26 basis points on the week to 2.89 per cent, a record low, for the biggest drop since January 2009. The 10-year German yield fell 13 basis points to 2.27 per cent, after reaching a record 2.26 per cent.
Recovery stalling
Government bonds have rallied around the world on growing signs the US economic recovery is stalling. The Federal Reserve Bank of Philadelphia's general economic index unexpectedly dropped on August 19 and a Labour Department report showed initial jobless claims in the US rose.
German government bonds returned 2.4 per cent this month, on course for their best performance since November 2008, according to indexes compiled by Bank of America's Merrill Lynch unit. US Treasuries earned 1.5 per cent, and UK gilts 2.7 per cent.
Weber, who heads Germany's Bundesbank, said it would be "wise" to keep full allotment in weekly, monthly and three-month refinancing operations until the end of the year.
"The ECB has backpedalled in their timetable already and they are signalling they are prepared to extend the conditions further," said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich.
German government bonds may rise next week as reports show that euro-region manufacturing and services growth slowed in August.
A composite index based on a survey of euro-area purchasing managers in both industries fell to 56.3 from 56.7 in July, according to the median estimate of 14 economists in a Bloomberg survey.
