German 10-year bonds posted their biggest weekly gain in almost three months after the European Central Bank held interest rates at a record low and a report showed the U.S lost more jobs in July than economists predicted.

The yield on 10-year French and Dutch securities fell to a record low, as industrial production in German unexpectedly fell. Non-farm U.S. payrolls declined by 131,000 in July after a revised reduction of 221,000 for June, the Labor Department said Friday. The median forecast by economists in a Bloomberg survey was for a reduction of 65,000. European Central Bank President Jean-Claude Trichet said the recovery will be “moderate and uneven.”
“The ECB is quite right to caution the market about the economic outlook,” said David Schnautz, a fixed-income strategist at Commerzbank AG in London. In the U.S., “signs that the economic recovery stalled also supported euro zone bonds,” he said.
The yield on the 10-year German bund slid 15 basis points in the week to 2.52 percent as of 4:40 p.m. yesterday in London, the biggest weekly decline in yield since the week ended May 21. Two-year yields fell three basis points to 0.75 percent.
The French 10-year yield slid as low as 2.87 percent and the Dutch yield fell to 2.7 percent.
German industrial production fell 0.6 percent from May, when it rose a revised 2.9 percent, the Economy Ministry in Berlin said Friday.
Concern the recovery from the worst recession since World War II is failing to gain traction has helped drive demand for the safest securities this year. German bonds returned 7.1 percent this year, compared with 6.7 percent for U.S. Treasuries and 6.8 percent for U.K. gilts, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts.
-----------Greek bonds
Greek bonds gained for a second week, sending the yield to 10.3 percent, after the International Monetary Fund said on Aug. 5 that the nation has made “great progress” implementing austerity measures to cut the European Union’s second-biggest budget gap, and should qualify for a 9-billion euro ($12 billion) instalment of emergency loans.
Bonds may decline next week on speculation economic growth of the 16-nation region accelerated in the second quarter. The economy grew 0.7 percent in the three months through June, compared with a rise of 0.2 percent in the first quarter, according to a Bloomberg survey before European Union’s statistics office in Luxembourg publishes the data on Aug. 13.