German government bonds climbed, snapping a two-day drop, as appetite for the securities increased after declines this month sent 10-year yields above 3 percent for the first time since May. The gains sent 30-year German yields down from the highest in almost seven months. Dutch and Belgian bonds also rose as European Central Bank Governing Council member Nout Wellink yesterday said he doesn’t favor joint bond issuance for the euro region, while the ECB today said emergency liquidity measures will stay “as long as necessary.” German data today confirmed that inflation accelerated in November. Irish bonds reversed gains after Fitch Ratings downgraded the nation’s credit. “The market is showing a healthy retracement after the rapid rise in yields,” said Orlando Green, assistant director of capital-markets strategy at Credit Agricole Corporate & Investment Bank in London. “There’s a little bit of a lull, but there’s an argument for a measured rise in yields because there are signs of economic recovery.” The 10-year bund yield fell three basis points to 2.98 percent as of 11:22 a.m. in London. The 2.5 percent security maturing in January 2021 rose 0.27, or 2.70 euros per 1,000-euro ($1,322) face amount, to 95.91. The yield on 30-year debt fell six basis points to 3.42 percent after reaching 3.51 percent yesterday, its highest since May 20. Dutch 10-year bond yields fell four basis points to 3.16 percent, and similar-maturity Belgian bond yields also dropped four basis points, to 3.98 percent. Wellink Opposition Bunds fell the past two days amid speculation that the euro area’s strongest economies will need to extend further support to weaker nations in the region. Jean-Claude Juncker, prime minister of Luxembourg and leader of the group of euro-area finance ministers, and Giulio Tremonti, finance minister of Italy, wrote in the Financial Times on Dec. 6 that Europe should issue common bonds in response to the sovereign debt crisis. Euro bonds are an “implicit transfer of money to other countries,” Wellink, the Dutch central bank chief, told reporters in Frankfurt yesterday. Creating euro bonds would be “a very intransparent way of burden sharing,” he said. France backs Germany’s resistance to increasing the size of the European Union bailout fund and to joint euro-area bonds, a French official told reporters today. The briefing came a day before a meeting of the French and German Cabinets tomorrow. Bonds from so-called peripheral nations rallied last week as traders said the ECB increased purchases of government bonds. The central bank said in its monthly bulletin today that it will keep emergency liquidity measures for as long as needed to help restore bank lending in the 16-member region. Irish Downgrade The Spanish 10-year bond yield rose five basis points to 5.30 percent and Portuguese yields climbed two basis points to 6.27 percent. Irish 10-year bond yields rose two basis points to 8.23 percent. Fitch cut the nation’s credit ratings to BBB+ from A+, saying the nation’s “financing flexibility” is reduced given costs to bail out the nation’s banks. “Ireland’s sovereign credit profile is no longer consistent with a high investment-grade rating,” Fitch wrote. “Ireland’s continued investment-grade status is underpinned by the EU-International Monetary Fund external support.” The German inflation rate, calculated using a harmonized EU method, increased to 1.6 percent from 1.3 percent in October, the Federal Statistics Office said. Prices rose 0.1 percent in the month. To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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