Greek, Irish and Portuguese two-year notes led declines bysecurities from Europe's most indebted nations, while German bundsrose before the publication of stress tests that may show Europeanbanks need more capital.

Yields on notes of the three nations to accept internationalbailouts reached euro-era records, while German 10-year yieldsheaded for a second straight week of declines as investors favoredthe safest assets amid concern the region's debt crisis isworsening. Regulators will release test results for 91 banks tohelp reassure investors that the region's lenders have enoughcapital. Standard & Poor's yesterday became the second ratingscompany this week to warn that it may cut the U.S.'s top creditgrade.

“Uncertainty continues to be very high, and that explains whybunds are stronger,” said Michael Markovic, a senior fixed- incomestrategist at Credit Suisse Group AG in Zurich. “If we see negativenews and surprises from big banks, that would be something thataffects the market, and it may lead to a further rally in bunds dueto safe-haven flows.”

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