European 10-year benchmark bunds had their best week since September last year as reports pointing to a sputtering economy prompted investors to seek the safety of fixed-income securities.
The German 4.5 percent note maturing in January 2013 climbed 1.21, or 12.1 euros per 1,000-euro (US$1,152) face amount, to 104.53 in the week. The yield fell 2 basis points by 8:15am in London and has dropped 16 basis points to 3.92 percent in the week. Yields on the German 2.5 percent note due March 2005 shed 8 basis points in the week, to 2.3 percent.
"We're still enthusiastic about government bonds," said Rajeev Demello, who manages the equivalent of US$5.7 billion in debt at Pictet & Cie in Geneva. "Economic data continues to disappoint."
He favors German over other European government debt and recently sold telecom and auto company credit.
German industrial output dropped for the first time this year in March, while separate figures this week showed exports fell for a second month in March as the euro's 9.6 percent gain against the dollar this year crimps sales.
Manufacturing orders in Germany had their second-largest drop in seven years in March, while unemployment in Europe's biggest economy rose to the highest in more than five years last month, reports this week showed. Germany makes up about one-third of the euro-region economy.
In the dozen countries sharing the euro, gross domestic product may have shrunk as much as 0.2 percent in the first quarter and may barely expand in the second, the EU's executive branch forecast.
The European Central Bank on Thursday left its key rate at 2.5 percent. Bank President Wim Duisenberg said the reasons the bank didn't lowered rates were "manifold," adding current interest rates were "conducive" to economic growth.