European bond sales decline

European government bonds fell as stocks rose around the world and Austria prepared to sell €2.2 billion (Dh11.75bn) of debt.

The decline lifted the yield on the 10-year German bund from near the lowest level in more than five months as the MSCI World Index of shares advanced for a second day, adding 0.7 per cent. Austria was selling 2014 and 2026 notes yesterday. The US will offer $39bn of three-year securities.

Austria was selling 2026 bonds with a coupon of 4.85 per cent and 3.4 per cent five-year bonds. Germany plans to issue €2bn of 30- year bonds today.

The yield on the bund, Europe's benchmark government security, rose two basis points to 3.14 per cent in London, after dropping to 3.12 per cent at the end of last week. The 3.5 per cent security due July 2019 lost 0.15, or €1.50 per €1,000 face amount, to 102.96. The yield on the two-year note also climbed two basis points, to 1.23 per cent.

Governments around the world are selling unprecedented amounts of debt to finance spending programmes designed to bolster their economies.

"The market is positioning for the supply that is coming up, especially in the very long end," said Karsten Linowsky, a fixed-income strategist at Credit Suisse Group AG in Zurich. "We have turned into positive territory in the equity market and this risk story is of course important."

German government bonds made investors 0.5 per cent this month, compared with 0.4 per cent for US Treasuries and 1.1 per cent for UK gilts, according to Merrill Lynch indices.

In the US, treasury debt prices held steady as a well-received auction and lingering economic concerns mitigated the drag from an improved reading of service activity in the US economy.

A negative perception of the labour market and doubts over the prospects for a robust recovery continued to support government bonds following dismal jobs data last week.

There was also solid demand for an auction of $7 billion in reopened 10-year Treasury Inflation-Protected Securities.

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