Italian bonds rose, pushing 10-year yields down from the highest level in almost eight weeks, amid optimism the nation will attract sufficient demand as it prepares to auction bills today and sells bonds tomorrow.
German 10-year bonds dropped for the first time in four days before the nation offers debt maturing in July 2022 today. Spanish debt outperformed bunds as Prime MinisterMariano Rajoy prepared to address lawmakers of his People’s Party to explain the deepest budget cuts in three decades. Spain’s 10-year yields have jumped more than 50 basis points this month as the nation’s borrowing costs increased at an auction on April 4.
“Italian banks have got access to lots of liquidity,” said Steven Major, global head of fixed-income research at HSBC Holdings Plc in London. “They can lever up and generate very high returns so Italian banks buy the short paper. I don’t think you’ll see a result like the Spanish auction,” he said in an interview on Bloomberg Television’s “Countdown” with Mark Barton and David Tweed.
Italy’s 10-year yield dropped 12 basis points, or 0.12 percentage points, to 5.56 percent at 10:01 a.m. London time. The 5 percent bond due in March 2022 rose 0.88, or 8.80 euros per 1,000-euro ($1,312) face amount, to 96.32.
The yield on Germany’s 2 percent bond maturing in January 2022 climbed three basis points to 1.67 percent. Benchmark 10- year yields dropped to a record 0.636 percent on Sept. 23.
Germany will sell as much as 5 billion euros of the new 10- year benchmark securities. The lowest yield on record for a 10- year auction was 1.8 percent at a sale on Sept. 21, according to data compiled by Bloomberg.
The German two-year yield climbed three basis points to 0.12 percent. The yield slid to 0.091 percent yesterday, the lowest since Bloomberg began collecting the data in 1990, after a U.S. report on April 6 showed payrolls increased by the fewest in five months.
“Yesterday’s trading encapsulates the reaction to the weak U.S. jobs report and the deterioration in periphery market sentiment,” said Peter Chatwell, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. “The main uncertainty this morning is on the supply side.”
Spain’s 10-year bond yield declined nine basis points to 5.89 percent after jumping 22 basis points yesterday.
German bunds returned 1.2 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. French bonds gained 1.6 percent, and Spanish securities lost 2.2 percent, the indexes show.
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