By Beth Mellor Dec. 28 (Bloomberg) -- European government bonds fell as stocks rose around the world on signs the economic recovery is gaining strength, damping demand for fixed-income assets. The decline pushed the yield on the 10-year German bund to the highest level in six weeks as the Dow Jones Stoxx 600 Index of shares advanced 0.4 percent. France’s CAC 40 Index gained 0.7 percent to its highest level since October 2008. Consumer prices in the German state of Saxony rose 0.8 percent in December from a year earlier, the state’s statistics office in Kamenz said today. Japanese industrial production climbed the most in six months in November, the Trade Ministry in Tokyo said. “People are more optimistic for economic recovery and they are positioning for next year,” said Michael Markovic, a senior fixed-income strategist at Credit Suisse Group AG in Zurich. “The growth scenario becomes more and more self-sustainable. Bunds are following Treasuries downwards.” The yield on the bund, Europe’s benchmark debt security, climbed 3 basis points, or 0.03 percentage points, to 3.35 basis points as of 11:15 a.m. in London, its highest level since Nov. 16. The 3.25 percent security due January 2020 slipped 0.28, or 2.8 euros per 1,000-euro ($1,439) face amount, to 99.19. The yield on the two-year note advanced 5 basis points to 1.23 percent. Government bonds fell across Europe, with the French 10- year yield rising 3 basis points to 3.98 percent and the equivalent-maturity Italian yield gaining 2 basis points to 4.04 percent. German Prices Data tomorrow may show German consumer prices climbed the most in 10 months in December. Prices in Europe’s largest economy rose 0.6 percent from November, when they contracted 0.1 percent, according to the median estimate of 25 economists in a Bloomberg survey. Excluding energy, consumer prices in Saxony rose 0.7 percent in the year and 0.9 percent in the month. “The market will focus on the month-on-month number which is also expected to be strong,” Markovic said. “To surprise the market we need something above 0.6 percent.” Market moves may be exaggerated today as trading volumes are small, he said. Treasuries fell before reports this week that economists said will show declines in U.S. home prices eased in October and consumer confidence climbed this month. The drop pushed the yield on the 10-year Treasury note up 4 basis points to 3.84 percent, the highest level since August, while the two-year note gained 1 basis point to 0.98 percent, the most since October. To contact the reporter on this story: Beth Mellor in London at bmellor@bloomberg.net

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