Germany’s 10-year bonds headed for their first monthly advance since July as a report showed the jobless rate in the euro area climbed to a record in October, indicating the region is struggling to boost growth. Austrian and Belgian 10-year yields fell, extending records for a third day, as separate data showed inflation in the common-currency region slowed for a second month in November. Spanish 10-year bonds slid, paring a third straight monthly gain, after a Greek aid agreement this week helped push yields to the lowest since March yesterday. The benchmark bund yield was two basis points from its lowest since Nov. 20 “The announcements we’ve had on the euro zone have been relatively constructive but at the same time there’s evidence that the economic situation is deteriorating,� said Patrick Jacq, a senior fixed-income strategist at BNP Paribas SA in Paris. “This is dragging core yields down,� he said, referring to the region’s highest-rated securities. The German 10-year yield was little changed at 1.37 percent at 11:19 a.m. London time, set for a nine basis-point monthly slide. It reached 1.35 percent two days ago, the lowest since Nov. 20. The price of the 1.5 percent bond due September 2022 was at 101.145. Ten-year bund yields may fall toward 1.20 percent in the first quarter of 2013, Jacq said. Bunds Climbed German securities climbed this week as reports signaling Europe’s recession is deepening countered finance ministers’ Nov. 27 agreement to ease the terms of Greece’s bailout. Unemployment in the 17-nation region rose to 11.7 percent from 11.6 percent in September, the European Union’s statistics office in Luxembourg said today. The inflation rate fell to 2.2 percent from 2.5 percent in October. That’s less than the median forecast of 2.4 percent in a Bloomberg News survey of 38 economists. Spanish 10-year yields rose six basis points to 5.40 percent today, having dropped 22 basis points this month. The rate tumbled to 5.20 percent yesterday, the lowest level since March 20. Similar-maturity Italian bond yields fell two basis points to 4.54 percent. They dropped to 4.47 percent yesterday, the least in almost two years. Austria’s 10-year rate reached 1.732 percent and Belgium’s fell to 2.15 percent, the lowest levels since Bloomberg began collecting the data in 1993. Volatility on Irish bonds was the highest in developed markets today, followed by those of Switzerland, according to measures of 10-year or equivalent-maturity debt, the spread between two- and 10-year securities, and credit default swaps. German bonds returned 3.8 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish debt gained 5.1 percent and Italy’s earned 20 percent. To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net; Lucy Meakin in London at lmeakin1@bloomberg.net To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

Source