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Italian bonds rose a second day as the nation sold 4.88 euros ($6.4 billion) of securities, close to its 5 billion-euro maximum target for the sale.
German two-year note yields stayed six basis points from a record low after Italy agreed to higher yields at today’s auction. Spanish bonds plunged last week amid concern demand for the nation’s debt is waning after borrowing costs rose and it sold just above the minimum amount it planned at an auction.
“The Italian auction was slightly more expensive for the Italian Treasury but not so bad that there are new worries regarding the European debt crisis,” said Christian Reicherter, a Frankfurt-based analyst at DZ Bank AG, Germany’s fourth- largest bank. “The spreads on peripherals are slightly tighter. Today the mood is slightly better.”
The yield on Italian 10-year bonds fell 14 basis points, or 0.14 percentage point, to 5.40 percent at 4:35 p.m. London time. The price of the 5 percent security due March 2022 rose 1.00, or 10 euros per 1,000-euro face amount, to 97.53.
Italy allotted 2.885 billion euros of 2.5 percent notes due 2015 at an average yield of 3.89 percent. That compares to 2.76 percent the last time the securities were offered on March 14. It also sold 3 percent notes due 2015 and bonds maturing in 2020 and 2023.
Deputy Finance Minister Vittorio Grilli said the country didn’t allocate all bonds in today’s auction because “it didn’t need funding at an unfavorable yield.”
Italy doesn’t have an urgent need to sell bonds, Grilli said in Milan today. The yields at the auction “reflect current market sentiment,” and the sale was in line with expectations, he said.
German two-year notes yielded 0.14 percent, after sliding to 0.091 percent on April 10, the least since Bloomberg started collecting the data in 1990. The yield on the nation’s 10-year bunds, Europe’s benchmark government securities, was little changed at 1.79 percent.
Spanish 10-year yields tumbled for a second day, sliding seven basis points to 5.81 percent. The rate on the securities jumped 43 basis points last week.
The additional yield investors demand to hold Spanish 10- year debt over similar maturity bunds closed above 400 basis points for a fourth day. It narrowed to 402 basis points today.
“The market appears to have breathed a sigh of relief that the auctions went reasonably smoothly, which has ultimately supported tighter Italian and Spanish spreads so far today,” Sercan Eraslan, a fixed-income analyst at WestLB AG, said in an e-mailed note.
Spanish Economy Minister Luis de Guindos said the recent surge in borrowing costs will be a problem if it continues, as the government used the threat of a European bailout to rally support behind austerity measures.
“The government needs to put the house in order because the alternative is much worse,” de Guindos said in Barcelona yesterday.
German bunds have returned 0.9 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Italian securities rallied 8.7 percent and Spanish debt slid 1.7 percent.
Volatility on France bonds was the highest in euro-area markets, according to measures of 10-year bonds, two- and 10- year yield spreads and credit-default swaps. The change in the spread was twice the 90-day average. It narrowed to 237 basis points today.
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