Germany’s bonds advanced, with 10- year yields dropping the most in nearly three weeks, after Luxembourg Prime Minister Jean-Claude Juncker said a decision on providing more aid to Greece won’t be reached before October.
German two-year notes rose for the first time in three days after a sale of the securities today attracted bids for more than the target amount. Spanish bonds halted a seven-day gain after yields dropped to a 10-week low. German Chancellor Angela Merkel, who meets French President Francois Hollande in Berlin tomorrow, said she’s willing to discuss Greece’s request for more time to meet terms of its international rescue.
“We’re in a situation where there is a high degree of uncertainty and a number of key meetings are taking place in the euro zone in coming days,” said Orlando Green, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. “There is still not a sense of one view coming from these meetings. Our medium-term view is for the periphery to rally from here but it will be bumpy along the way,” he said referring to bonds of Europe’s lower-rated nations.
Germany’s 10-year yield fell 10 basis points, or 0.1 percentage point, to 1.46 percent at 4:34 p.m. London time after dropping as much as 11 basis points, the most since Aug. 2. The 1.75 percent bond due in July 2022 rose 0.92, or 9.20 euros per 1,000-euro face amount, to 102.665.
“We’re waiting for the troika report” on Greek progress in implementing the conditions for aid, Juncker, who heads the group of euro-area finance ministers, told RTL Television Luxembourg in an interview posted on the government website.
Greek Prime Minister Antonis Samaras called for “more time” to carry out policy changes to deal with his nation’s debt crisis before meeting with Juncker in Athens today.
“All we want is a little more air to breathe to get the economy going and increase government revenue,” Samaras was quoted as saying in an interview with Germany’s Bild newspaper. “More time doesn’t necessarily mean more money.”
Germany received bids of 6.24 billion euros for the two- year notes it sold today, exceeding the 5 billion-euro maximum target, according to a statement from the Bundesbank.
The nation sold the securities at an average yield of zero percent, compared with minus 0.06 percent at an offering of similar-maturity debt on July 18.
The yield on the previously issued two-year securities fell one basis point to minus 0.06 percent. The yield climbed above zero yesterday for the first time in five weeks.
Volatility on German government bonds was the highest in euro-region markets today, followed by the Netherlands and Finland, according to measures of 10-year bonds, the spread between two-and 10-year securities, and credit-default swaps.
Greek bonds maturing in February 2023 rose for a fourth day, even after Juncker’s comments. The yield declined 34 basis points to 23.85 percent after dropping to 23.81 percent, the lowest level since May 10.
Spain’s 10-year yield climbed six basis points to 6.28 percent after falling to 6.15 percent, the lowest since June 11.
The yield on similar-maturity Italian debt was little changed at 5.66 percent after declining to 5.57 percent, the least since June 7.
BlueBay Asset Management, which manages $41 billion in fixed income and alternative investment products, has been buying Spanish, Italian and Irish bonds since European Central Bank President Mario Draghi pledged on July 26 to do “whatever it takes” to save the euro, according to Mark Dowding, a London-based fixed-income portfolio manager at the company.
BlueBay has been buying the bonds “over the past month and we’re overweight today,” Dowding said in an interview with Guy Johnson and Francine Lacqua on Bloomberg Television’s “City Central.” “If you ask me a month from now our position may be very different.”
German government bonds returned 2.6 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish debt fell 1.5 percent, and Italy’s rose 11 percent.
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