Fata Morgana Europeana: European Bonds Decline as Confidence Soars, Equities Advance - by Mathew Brown
European government bonds fell as a report showed German investor confidence climbed to a three-year high this month, and as stock-market gains sapped demand for the safety of fixed-income assets. The decline pushed the yield on the two-year note up from the lowest level in six weeks. The ZEW Center for European Economic Research’s index of investor and analyst expectations rose to 31.1, from 13 in April. Stocks climbed as speculation three U.S. banks will repay $45 billion of government funds stoked optimism the worst of the financial crisis is over.
“Economic confidence is better and this is helping stocks and stopping the recovery of the euro-region bond market,” said Peter Mueller, a fixed-income strategist in Frankfurt at Commerzbank AG, Germany’s second-biggest lender. “The risks for the market remain to the downside.”
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