German bunds fell as data showed the nation’s exports rebounded in February, bolstering bets on tighter monetary policy, while rallying stock markets lessened the appeal of the safest assets. Portuguese two-year yields reached a euro-era record as Europe’s finance ministers meet to discuss the nation’s aid package. European Central Bank President Jean-Claude Trichet yesterday raised the benchmark interest rate by 25 basis points. The Stoxx Europe 600 Index gained 0.4 percent, while the MSCI Asia Pacific Index rose 1 percent on optimism that damage was limited from yesterday’s 7.1-magnitude earthquake in Japan. “It seems to be a general risk-on tone today, to the detriment of the benchmark AAA bonds,” said Kornelius Purps, an interest-rate strategist at UniCredit SpA in Munich. “There’s considerable potential to price in another rate hike for this year, especially for short-end maturities.” The yield on the bund, the euro-region’s benchmark government security, climbed four basis points to 3.46 percent at 11:10 a.m. in London, headed for a weekly advance. The 2.5 percent security maturing January 2021 slipped 0.29, or 2.9 euros per 1,000-euro ($1,429) face amount, to 92.17. Two-year note yields gained five basis points to 1.88 percent. German exports, adjusted for work days and seasonal changes, increased 2.7 percent from January, when they dropped 1 percent, the Federal Statistics Office in Wiesbaden said. Portuguese Bonds Portuguese government debt headed for a third weekly drop after it followed Greece and Ireland in seeking a European Union-led bailout. Europe’s richer countries pushed Portugal to make deeper-than-planned budget cuts in exchange for a rescue package of as much as 90 billion euros ($130 billion). Deficit-reduction steps must go beyond the measures that failed to pass the Portuguese parliament last month, Finnish Finance Minister Jyrki Katainen said before a meeting of ministers in Godollo, Hungary. The yield on Portugal’s 10-year debt rose four basis points to 8.64 percent. Two-year bonds slumped, pushing the yield to a euro-era record of 9.19 percent. The Iberian nation’s debt ranks as the worst performer in 2011, down 9.6 percent, according to indexes compiled by the European Federation of Financial Analysts Societies and Bloomberg. Bunds lost 2.7 percent, while Spanish debt generated returns of 2.6 percent. The difference in yield, or spread, between Spanish 10-year debt and equivalent German securities narrowed to as little as 178 basis points. That’s the least since November 2. ‘Rediscovered Trust’ “The market has rediscovered trust in the Spanish government market, in the Spanish financial market as well,” Christophe Rieger, head of fixed-income strategy at Commerzbank AG in Frankfurt, said in an interview on Bloomberg Television’s “On The Move” with Mark Barton. “We do see these trends continuing in the near to medium term. However, major risks remain relating to the Spanish economy, so this spread- tightening momentum now does not look set to be a one-way street.” Spanish government debt was little changed, with the yield at 5.25 percent, while similar maturity Greek yields jumped five basis points. The yield on Ireland’s benchmark bonds were little changed at 9.27 percent. To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net. To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

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