European bonds recorded their third consecutive monthly gains on speculation that economic growth will remain weak and prompt the European Central Bank to lower interest rates.
"Growth is likely to remain slow," said Angus Sibley, who helps manage 6 billion euro (US$9.9 billion) at Carr Sheppards Crosth-waite Ltd in London. "The ECB will eventually be forced to cut interest rates."
The yield on the German 4 1/2 percent note due in January 2013 fell 13 basis points last month to 4.07 percent. It rose 3 basis points in the past week, after touching 4.02 percent on Monday. The yield on the 3 percent note due December 2004 dropped 14 basis points to 2.54 percent over the month and were unchanged on the week. A basis point is 0.01 percentage point.
Investors sought out the fixed returns of government debt as European consumer confidence slipped in January to its lowest in almost six years. Business confidence declined for the first time in five months. An index of euro region consumer confidence dropped to minus 17 from minus 16 in December, an EU survey showed on Friday. Business confidence fell to -10 from -9. The euro-region's US$7 trillion economy may contract as much as 0.1 percent this quarter, the EU has forecast.
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