German bonds post first decline in six weeks

Berlin: German government bonds posted their first weekly decline since July after US jobs figures and the euro region's service and manufacturing data beat economist predictions, damping concern the global recovery is faltering.

Ten-year yields rose to a three-week high on Friday after a report showed US companies added 67,000 jobs in August. The median estimate of economists surveyed by Bloomberg News called for a gain of 40,000.

The European Central Bank on Thursday raised its economic forecasts for the region, and its President Jean-Claude Trichet said a double dip scenario is "not in the cards".

"Investors are reappraising their positions," said Peter Chatwell, an interest-rate strategist at Credit Agricole Corporate & Investment Bank in London.

"Bond yields are close to record lows, and to justify buying them you have to be buying into a double-dip. But data we saw this week didn't quite gel with that story."

German 10-year bund yields climbed X15 basis points in the week as of 5pm in London on Friday. They reached 2.37 per centon Friday, the highest since August 19.

The 30-year yield rose 28 basis points, the biggest weekly advance since May 8, 2009.

Bunds, US Treasuries and UK gilts rallied last month on mounting evidence that America's economic recovery is faltering.

The US economy grew at an annual 1.6 per cent pace in the second quarter, according to an August 27 report, down from an earlier estimate of 2.4 per cent.

Positive data

Data last week helped overcome concern that slowing growth in the US would hamper the recovery around the world, helping the 10-year bund yield recover from its record low of 2.087 per cent on August 31.

The ECB said it now expects gross domestic product for 2010 to be between 1.4 per cent and 1.8 per cent, up from previous forecast range between 0.7 per cent and 1.3 per cent.

Growth will be between 0.5 per cent and 2.3 per cent in 2011, it said, revising a previous estimate of 0.2 per cent to 2.2 per cent.

German bonds may rise this week on speculation factory orders grew at a slower pace in July.

The Economy Ministry in Berlin will say on September 7 orders increased 0.5 per cent from June, when they rose 3.2 per cent, according to a Bloomberg survey.

Most so-called peripheral euro-region bonds advanced relative to benchmark German bunds.