German notes rise on recession fear

Berlin: German two-year government notes rose last week, headed for the longest run of monthly gains in a decade, after reports showed European unemployment increased more than economists expected in January and inflation slowed.

The notes climbed after data showed German exports slumped in the fourth quarter as Europe's largest economy contracted the most in 22 years, giving the European Central Bank more reason to cut interest rates this week. The securities stayed higher even after a government report showed German inflation unexpectedly accelerated in February.

"The benign fundamental environment for bunds is confirmed yet again," said Peter Mueller, a Frankfurt-based fixed-income strategist at Commerzbank AG, Germany's second-largest lender. "We're unlikely to see a decline in general risk aversion that would put downward pressure on bund prices."

The yield on the 10-year bund, Europe's benchmark government security, fell nine basis points to 3.04 per cent in London on Friday. The yield dropped 25 basis points last month. The price of the 3.75 per cent security due January 2019 rose 0.75, or 7.5 euros per 1,000-euro face amount, to 105.94.