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Spanish Bonds Climb Following Greek Debt Swap as German Exports Increase

March 09, 2012

Spain’s bonds rose for a third day after Greece got the biggest sovereign restructuring in history as private investors forgave more than 100 billion euros ($131 billion) of debt, boosting demand for higher-yielding assets.

Italy’s 10-year bonds headed for a ninth weekly gain as government reports showed German exports rose and U.S. employers hired more workers than economists forecast, fueling optimism a global recovery will make it easier for Europe’s highly-indebted nations to meet their obligations. German 10-year yields were two basis points from a seven-week low as Fitch Ratings downgraded Greece to Restricted Default after the debt swap.

“Overall, we think this is positive for markets,” said Anders Moller Lumholtz, an analyst at Danske Bank A/S (DANSKE) in Copenhagen. “The big disaster on Greece has been averted and the improvement in risk we saw yesterday is continuing. There are still some details that we don’t have, but overall the reaction is positive.”

Spain’s 10-year yield dropped six basis points, or 0.06 percentage point, to 5 percent at 3:17 p.m. London time. The 5.85 percent bond due in January 2022 climbed 0.505, or 5.05 euros per 1,000-euro face amount, to 106.53.

The Italian 10-year yield has fallen six basis points this week to 4.85 percent, extending its decline to 226 basis points in 2012. It climbed four basis points today.

Aid for Greece

Euro-region finance ministers agreed on a conference call that the swap meant Greece had met the terms to proceed with a 130 billion-euro rescue package designed to prevent a collapse of the economy. Ministers freed up 35.5 billion euros in public sweeteners and interest now, with a decision on the balance to be made at a March 12 meeting in Brussels.

Greek government bonds due to be issued after the swap were priced at less than 30 percent of face amount, reflecting concern the country will still struggle to meet its new obligations amid a recession. The economy shrank 7.5 percent in the fourth quarter from the same period in 2010, the Athens- based Hellenic Statistical Authority said today.

The 2 percent bonds maturing in February 2023 were bid at 25.75 cents on the euro, BNP Paribas SA data on Bloomberg showed. They were offered at 26 cents, according to Jefferies Group Inc. That left the yield on the securities bid at 19.56 percent and offered at 19.42 percent, the data showed.

“It would be a big mistake to think we are out of the woods,” German Finance Minister Wolfgang Schaeuble told reporters in Berlin after the conference call.

Fitch lowered Greece’s long-term foreign and local-currency issuer default ratings from C, the company said in an e-mailed statement today.

German Exports

German exports, adjusted for work days and seasonal changes, increased 2.3 percent in January from December, when they dropped a revised 4.4 percent, the Federal Statistics Office said. U.S. payrolls climbed 227,000 last month, the Labor Department said in Washington. Economists predicted 210,000 new jobs, according to a Bloomberg News survey.

German 10-year yields were little changed at 1.79 percent after falling to 1.77 percent on March 7, the lowest since Jan. 16. Two-year yields were also little changed, at 0.17 percent. They declined to a record 0.134 percent on Jan. 12.

Euro-area government bonds have returned 11 percent since March 9, 2009, when the global bull market in stocks began, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. The Stoxx Europe 600 Index (SXXP) of shares has rallied 68 percent and the Standard & Poor’s 500 Index (SXXP) has surged 102 percent over the same period.

German bonds have gained 0.3 percent this year and 18 percent the past three years, the indexes show. Italian bonds climbed 13 percent since Dec. 31.

To contact the reporters on this story: Emma Charlton in London at; Lukanyo Mnyanda in Edinburgh at

To contact the editor responsible for this story: Daniel Tilles at

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