European government bonds fell after a survey of purchasing managers showed euro-area manufacturing expanded for a fifth month in November, damping demand for fixed-income assets. German 10-year yields climbed the most in almost two weeks, while French, Dutch and Austrian securities all declined. Spanish bonds dropped as its manufacturing gauge was lower than analysts forecast. Economists say a U.S. report today from the Institute of Supply Management will show American factory output increased last month. Greek bonds advanced for a third day after Moody’s Investors Service increased the country’s credit rating last week. “The European PMIs were stronger than expected, apart from Spain, and this is weighing on bunds,� said Mathias Van Der Jeugt, a fixed-income strategist at KBC Bank NV in Brussels. “The data limits the chance that the European Central Bank will ease further. We believe U.S. manufacturing ISM can also beat consensus today and add downward pressure onto bunds.� Germany’s 10-year yield rose three basis points, or 0.03 percentage point, to 1.73 percent at 11:39 a.m. London time, the biggest increase since Nov. 19. The 2 percent bond maturing in August 2023 declined 0.31, or 3.10 euros per 1,000-euro ($1,354) face amount, to 102.41. French 10-year yields climbed three basis points to 2.18 percent, Dutch ones rose three basis points to 2.06 percent, and Austria’s increased three basis points to 2.07 percent. Most Volatile Volatility on German bonds was the highest in euro-area markets today, followed by those of France and Austria, according to measures of 10-year debt, the yield spread between two- and 10-year securities and credit-default swaps. Markit Economics said its euro-area manufacturing index improved to 51.6 from 51.3 in October, exceeding the previous estimate of 51.5 released Nov. 21. A reading above 50 indicates expansion. The ISM’s index of U.S. manufacturing was at 55.1 in November from 56.4 a month earlier, according to a Bloomberg survey before the data is released today. Spain’s 10-year yield rose three basis points to 4.16 percent, while the rate on Italy’s 10-year bonds increased two basis points to 4.07 percent. The Netherlands sold 3 billion euros of three- and six-month bills after the nation was stripped of its top rating at Standard & Poor’s last week. The average yield on the 86-day security was 0.04 percent, up from 0.015 percent at a previous auction of similar-maturity debt on Nov. 18. Greek bonds rose after Moody’s increased the nation’s credit rating by two steps on Nov. 29, citing progress in fiscal consolidation and an improving economic outlook. The 10-year yield declined five basis points to 8.73 percent after climbing to 8.89 percent on Nov. 28, the highest since Oct. 14. German bonds lost 1 percent this year through Nov. 29, the worst performer after the Netherlands among 15 euro-area debt markets tracked by Bloomberg World Bond Indexes. Spain’s returned 11 percent and Italy’s earned 7.5 percent. To contact the reporters on this story: Lucy Meakin in London at lmeakin1@bloomberg.net; Neal Armstrong in London at narmstrong8@bloomberg.net To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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