German 10-year bunds posted their biggest weekly gain this year as signs that global growth is slowing boosted demand for the euro area’s safest assets.
Two-year notes also rose the most since December after industry data showed euro-region manufacturing and services shrank more than economists forecast. Spain’s 10-year yields climbed for a third week after Citigroup Inc. chief economist Willem Buiter said the nation faced an increasing risk of requiring a debt restructuring. Greek securities maturing in February 2023 fell to their lowest since the nation secured the largest debt restructuring in history.
“People still aren’t wholeheartedly convinced that all Europe’s problems are solved,” said Eric Wand, a fixed-income strategist at Lloyds Bank Corporate Markets in London. “There are still some clear implementation risks around Europe, and that’s keeping an underlying bid in bunds.”
The German 10-year yield fell 18 basis points, or 0.18 percentage point, in the week to 1.87 percent at 4:11 p.m. London time yesterday. That was the steepest decline since the period ending Dec. 16. The yield rose 26 basis points the previous week, the most since Nov. 25.
The 2 percent bond due January 2022 rose 1.51, or 15.10 euros per 1,000-euro ($1,323) face amount, to 101.060. The two- year note yield was at 0.24 percent, from 0.33 percent a week ago, the biggest five-day drop since Dec. 16.
A euro-area composite index based on a survey of purchasing managers in services and manufacturing fell to 48.7 in March from 49.3 in February, London-based Markit Economics said March 22. A reading below 50 indicates contraction. A preliminary index of China manufacturing from HSBC Holdings Plc and Markit Economics dropped to 48.1 from 49.6 in the previous month.
Spain is at “a greater risk than ever before” of a debt restructuring, Buiter said in an interview with Tom Keene and Ken Prewitt on Bloomberg Radio on March 21. “Spain is the key country about which I’m most worried.” The country has “moved to the wrong side of the spectrum,” he said.
Spain’s 10-year (GSPG10YR) bonds have fallen for nine of the past 10 days, with the yield rising 19 basis points last week to 5.39 percent. The yield on similar-maturity Italian debt rose 20 basis points to 5.06 percent.
The yield on Greek securities due February 2023 rose to 20.16 percent from 18.45 percent on March 12, when the bonds began trading.
A report next week will show German business confidence stayed close to a seven-month high this month, according to economists surveyed by Bloomberg News before the data is released March 26.
Prices rose 0.4 percent in Germany in March, after gaining 0.9 percent the previous month, the Bundesbank will say in a provisional estimate on March 28, according to a separate survey.
The European Financial Stability Facility bailout fund sold a total of about 7.5 billion euros of six-month, five-year and 20-year debt this week. Germany will auction 3 billion euros of 12-month bills on March 26, while Spain, France and Italy also plan to sell short-term debt.
German bunds have lost 0.4 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Italian bonds have added 12 percent and Spanish securities 0.5 percent.
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