Bloomberg News

Spanish Bonds Rise After Bankia Takeover; Bunds Snap 2-Day Gain

May 10, 2012

Spanish bonds advanced, snapping a three-day drop, after the nation said it would take over Bankia SA (BKIA) and prepared to inject public funds into the banking group, bolstering investor confidence.

German bunds snapped a two-day advance after the European Financial Stability Facility yesterday confirmed it would release 5.2 billion euros ($6.74 billion) in funds to Greece. The euro strengthened amid renewed optimism as Greek socialist Pasok leader Evangelos Venizelos prepares to try to form a government.

“The late news yesterday that Spain is going to part- nationalize Bankia is the major driver,” said Eric Wand, a fixed-income strategist at Lloyds Banking Group Plc in London. “It’s a step in the right direction and I think the market likes it. We’ve seen a decent selloff in the last couple of days and people are seizing on that to reprice” Spanish bonds.

Spain’s 10-year bond yields fell four basis points, or 0.04 percentage point, to 6.04 percent at 9:37 a.m. London time. The 5.85 percent security due January 2022 rose 0.255, or 2.55 euros per 1,000-euro face amount, to 98.585.

The government will take a 45 percent controlling stake in Bankia, the group with the most Spanish real estate, and aims to help shore up Spain’s financial system.

Italy’s 10-year yield climbed one basis point to 5.61 percent.

German Records

The German 10-year yield was little changed at 1.52 percent, after sliding to a record 1.497 percent yesterday.

German two-, five-, 10- and 30-year yields dropped to all- time lows yesterday as Greek leaders struggled to form a new government, fueling speculation the Hellenic nation will withdraw from the single-currency bloc. Venizelos will receive a three-day mandate to try to build a coalition from President Karolos Papoulias today.

The 2 percent Greek bond maturing in February 2023 fell for an eighth day, with the yield gaining 30 basis points to 23.99 percent.

German debt returned 2.2 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.

-- Editors: Mark McCord, Nicholas Reynolds

To contact the reporters on this story: Lucy Meakin in London at lmeakin1@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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