EUROPE - German government bonds returned almost 7% in the first half of 2010, according to Standard & Poor’s (S&P) Eurozone Government Bond index.

At 6.99%, Germany offered more than double the average return, leading the field ahead of the Netherlands, Austria and Slovenia with between 6.7% and 6.3%.

In the wake of its sovereign debt crisis, Greece’s bonds dropped in value by almost 20%, with Portugal a distant second after devaluing by 5.5%.

Additionally, Ireland and Spain saw their value shrink by 1-2%, with Italy the only PIIGS country to offer meagre positive returns of 0.7%.

Regarding the developments over the last six months, JR Rieger of S&P Indices said: “The first six months of 2010 have seen, by the standards of government bond markets, quite dramatically diverging performance by the sovereign constituents of our Eurozone Government Bond index.

“Government bond markets are like huge glaciers, so these apparently small shifts in index weight over just a six-month period are quite significant.”

Overall, Germany and Italy made up the biggest share of government bonds, with 22% of the market each, while Spain and Portugal only laid claim to around 9% and 2%, respectively.

France came in third with 21% market share, while Finland came in last with just over 1%.