European government bonds fell on the month as signs German inflation is accelerating made it more likely the European Central Bank will lift interest rates again by year-end.
Benchmark 10-year bund yields touched a six-week high this past week after reports showed euro-region money-supply growth held near the fastest pace in 28 years in August and German inflation quickened to the highest rate in more than six years. Officials at the ECB this week said there are ``persisting'' risks to price growth among the 13 nations that share the euro.
The inflation ``data was exactly what the hawks on the ECB have been warning about for months,'' said Marcus Ostwald, a fixed-income strategist at Insinger de Beaufort SA in London. ``The risk on interest rates remains to the upside.''
The yield on the 10-year bund rose 11 basis points this past month to 4.33 percent by 4:15 p.m. yesterday in London.
The price of the 4.25 percent security due July 2017, which is more sensitive to inflation expectations than shorter-dated debt, dropped to 99.36.
Bunds returned investors 2.54 percent this quarter, compared with a return of 1.65 percent on two-year notes, according to indexes compiled by Merrill Lynch & Co.
Bunds pared their monthly decline after a German Federal Statistics report yesterday showed sales in Europe's biggest economy fell 1.4 percent in August, after gaining 0.6 percent the month before.
Benchmark debt was also buoyed yesterday after the Financial Times reported that Newcastle, England-based Northern Rock Plc had been forced to borrow a further 5 billion pounds ($10 billion) from the Bank of England since a Sept. 14 bailout.
German Inflation
Germany's inflation rate, measured using a harmonized European Union method, rose to 2.7 percent from 2 percent in August, the Federal Statistics Office said this week. That's the most since June 2001 and above than the 2.5 percent median forecast of 22 economist estimates in a Bloomberg News survey. Consumer prices rose 0.2 percent in the month.
M3 money supply, which the ECB uses to measure future inflation, grew 11.6 percent from a year earlier, after growing 11.7 percent in July, the central bank said this week.
ECB forecasts ``indicate continued growth and persisting risks for inflation,'' policy maker Guy Quaden, who is also governor of Belgian's central bank, said on Sept. 26.
Central bank President Jean-Claude Trichet this week told Dutch television it's ``too early'' to decide whether financial- market turmoil will hurt economic growth in the euro region.
This view was echoed by ECB Vice President Lucas Papademos who said in New York this week that ``so far, the effects of the market turbulence on the euro area economy have not been significant.''
Benchmark 10-year bund yields touched a six-week high this past week after reports showed euro-region money-supply growth held near the fastest pace in 28 years in August and German inflation quickened to the highest rate in more than six years. Officials at the ECB this week said there are ``persisting'' risks to price growth among the 13 nations that share the euro.
The inflation ``data was exactly what the hawks on the ECB have been warning about for months,'' said Marcus Ostwald, a fixed-income strategist at Insinger de Beaufort SA in London. ``The risk on interest rates remains to the upside.''
The yield on the 10-year bund rose 11 basis points this past month to 4.33 percent by 4:15 p.m. yesterday in London.
The price of the 4.25 percent security due July 2017, which is more sensitive to inflation expectations than shorter-dated debt, dropped to 99.36.
Bunds returned investors 2.54 percent this quarter, compared with a return of 1.65 percent on two-year notes, according to indexes compiled by Merrill Lynch & Co.
Bunds pared their monthly decline after a German Federal Statistics report yesterday showed sales in Europe's biggest economy fell 1.4 percent in August, after gaining 0.6 percent the month before.
Benchmark debt was also buoyed yesterday after the Financial Times reported that Newcastle, England-based Northern Rock Plc had been forced to borrow a further 5 billion pounds ($10 billion) from the Bank of England since a Sept. 14 bailout.
German Inflation
Germany's inflation rate, measured using a harmonized European Union method, rose to 2.7 percent from 2 percent in August, the Federal Statistics Office said this week. That's the most since June 2001 and above than the 2.5 percent median forecast of 22 economist estimates in a Bloomberg News survey. Consumer prices rose 0.2 percent in the month.
M3 money supply, which the ECB uses to measure future inflation, grew 11.6 percent from a year earlier, after growing 11.7 percent in July, the central bank said this week.
ECB forecasts ``indicate continued growth and persisting risks for inflation,'' policy maker Guy Quaden, who is also governor of Belgian's central bank, said on Sept. 26.
Central bank President Jean-Claude Trichet this week told Dutch television it's ``too early'' to decide whether financial- market turmoil will hurt economic growth in the euro region.
This view was echoed by ECB Vice President Lucas Papademos who said in New York this week that ``so far, the effects of the market turbulence on the euro area economy have not been significant.''
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