Bloomberg News

Italian Bonds Gain for Seventh Day Amid EU Bank Plans After Sale

October 19, 2012

Italian Bonds Gain for Seventh Day Amid EU Bank Plans After Sale

The national flag of Italy flies from the city hall in Rome. Photographer: Alessia Pierdomenico/Bloomberg

Italian 10-year bonds rose for a seventh day, the longest run of gains in more than two years, as European Union leaders committed to the goal of establishing a euro-area bank supervisor by year-end.

Italy’s benchmark yields fell to the lowest since March as the Treasury said yesterday it received orders for more than 18 billion euros ($23.6 billion) of retail bonds it was selling to individual investors, double the two previous offers combined. Spanish 10-year bonds advanced, with yields dropping to the least since April. Germany’s bunds gained as the EU summit in Brussels entered its second day.

“The general mood toward the periphery is quite positive at the moment,” said Jamie Searle, a fixed-income strategist at Citigroup Inc. in London, referring to nations such as Spain and Italy. “In terms of Italy’s funding needs, 18 billion euros is a lot more than they would have been expecting to raise, so it does mean that they’re going to have less funding pressure between now and year-end.”

Italy’s 10-year yield fell four basis points, or 0.04 percentage point, to 4.73 percent at 11:15 a.m. London time after falling to 4.70 percent, the lowest since March 9. The 5.5 percent bond due in November 2022 rose 0.285, or 2.85 euros per 1,000-euro face amount, to 106.54. The seven-day gain is the longest since August 2010.

EU Framework

The EU will seek to agree on a framework that makes the European Central Bank the main supervisor of lenders by Jan. 1, according to conclusions released today from the leaders’ summit. The new system, intended to break the link between banks and governments at the core of the region’s financial crisis, will be phased in over the next year and may cover all 6,000 euro-area banks by Jan. 1, 2014.

The Italian Treasury earlier this year began selling the retail bonds to local investors, who are among the biggest savers in Europe, as contagion from the debt crisis triggered an exodus of foreign funds.

The orders dwarfed the 7.3 billion euros of bonds placed in the first sale in March and the 1.7 billion euros at the second sale in June. The 18 billion-euro amount was three times as much as the Treasury took in at its monthly auction on Oct. 11.

Spain’s 10-year yield dropped three basis points to 5.31 percent after falling to 5.26 percent, the lowest since April 2.

German 10-year yields declined three basis points to 1.61 percent. The yield climbed to 1.66 percent yesterday, the highest level since Sept. 19.

Most Volatile

Volatility on Dutch bonds was the highest in euro-area markets, followed by Austria and France, according to measures of 10-year or equivalent-maturity debt, the spread between two- year and 10-year securities and credit-default swaps.

The extra yield investors demand to hold Dutch 10-year bonds instead of similar-maturity German bunds shrank one basis point to 22 basis points.

Germany’s bonds returned 2.2 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish securities rose 4.1 percent and Italian debt gained 18 percent.

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: Paul Dobson at pdobson2@bloomberg.net


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