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June 27 (Bloomberg) — German government bonds fell amid speculation European banks will contribute to efforts to stave off a Greek default, curbing demand for the region’s safest fixed-income securities.

Italian and Spanish securities recovered from an intraday slump as German Deputy Finance Minister Joerg Asmussen said he expects the Greek parliament to pass a package of additional austerity measures this week. French banks told the government they are willing to partly roll over maturing Greek bonds. Italy sold zero-coupon bonds maturing in 2013 as well as 183-day bills. Irish and Portuguese bonds dropped on concern contagion from Greece’s debt crisis will infect other nations.

“Clearly there is some discussions going on in the background about the private sector involvement in Greece,” said Orlando Green, a fixed-income strategist at Credit Agricole SA in London. “If the private sector is voluntarily getting involved then that would be seen as positive because it would help avert a Greek default.”

The yield on 10-year German bunds, the region’s benchmark government debt securities, rose three basis points to 2.87 percent as of 10:30 a.m. in London. The 3.25 percent bonds maturing in July 2021 fell 0.3, or 3 euros per 1,000-euro ($1,420) face amount, to 103.265. The yield on two-year German notes climbed two basis points to 1.38 percent.

Spanish 10-year yields were little changed at 5.68 percent, while the rate on similar-maturity Italian bonds rose two basis points to 4.99 percent. The Irish two-year note yield jumped 30 basis points to 14.03 percent and Portuguese two-year yields climbed 23 basis points to 14.51 percent.

Greek two-year yields were 13 basis points higher at 28.43 percent, while 10-year yields climbed three basis points to 16.81 percent.

–With assistance from Lukanyo Mnyanda in Edinburgh. Editors: Matthew Brown, Mark McCord

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