German government bonds fell, with 10-year yields reaching the highest in a week, amid speculation the lowest inflation rate in four years will not be enough to spur the European Central Bank to increase stimulus.
Spain’s 10-year bonds climbed for a seventh day, matching the longest run of gains since September, as Royal Bank of Scotland Group Plc said the rally in the securities of Europe’s most-indebted nations can extend.
Investors are accepting the lowest yields on German bunds relative to Treasuries in more than seven years as the European Central Bank nourishes the euro-area recovery with a pledge to keep interest rates subdued.
Investors paid little attention to Italy’s political intrigue this month, focusing instead on early signs of economic recovery and the outgoing government’s commitment to budget rigor. That may start to change.
Euro-area government bonds surged, led by Italian and Spanish securities, after the European Central Bank unexpectedly cut its benchmark interest rate to a record low, boosting demand for fixed-income assets.