Bloomberg News

Spanish Yields Drop From 6-Week High on Schaeuble Greek Comments

November 13, 2012

Spanish Yields Climb to Six-Week High as IMF, Europe Disagree

Spain’s 10-year yield increased four basis points, or 0.04 percentage point, to 5.93 percent as of 9:42 a.m. London time, after reaching 5.96 percent, the highest since Oct. 1. Photographer: Angel Navarrete/Bloomberg

Spanish 10-year bonds rose, pushing down yields from the highest in more than six weeks, after German Finance Minister Wolfgang Schaeuble signaled Greek aid payments may be bundled into a single installment.

Germany’s 10-year bonds erased a gain after Bild-Zeitung earlier reported that the nation favored giving Greece a one-off disbursement of 44 billion euros ($55.8 billion). European policy makers extended by two years the Mediterranean country’s deadline to reduce its budget deficit, though they didn’t say how the additional funding needs would be covered. The yields on Austrian and Belgian securities slid to records and French bonds climbed for a ninth day, the longest winning streak since 1997.

“The headlines on Schaeuble” have boosted Spanish and Italian bonds, said Marc Ostwald, a rates strategist at Monument Securities Ltd. in London. “He’s saying all that is left to discuss is process rather than principal. That gives markets a bit of reassurance.”

Spain’s 10-year yields dropped four basis points, or 0.04 percentage point, to 5.85 percent at 5 p.m. London time, after climbing to 5.96 percent, the highest since Oct. 1. The 5.85 percent bond due January 2022 fell 0.275, or 2.75 euros per 1,000-euro face amount, to 99.975. The rate on similar-maturity Italian bonds dropped six basis points to 4.96 percent.

Greek Payments

Germany plans to bundle aid payments to Greece, Bild- Zeitung reported, citing government sources it didn’t identify. The disbursement would consist of 31.3 billion euros from a second-quarter aid plan that hasn’t been paid out yet, 5 billion euros from funds earmarked for the third-quarter and 8.3 billion from the fourth-quarter, the newspaper reported.

European policy makers granted Greece until 2016 to cut the nation’s deficit to 2 percent of gross domestic product, putting off until Nov. 20 a decision on how to cover additional Greek requirements of as much as 32.6 billion euros.

International Monetary Fund Managing Director Christine Lagarde took issue with a decision by the euro chiefs to postpone the goal of getting Greece’s debt down to 120 percent of gross domestic product until 2022, saying the creditors had “different views.”

Greek bonds advanced as the nation auctioned 4.06 billion euros of 28- and 91-day bills. The yield on Greece’s 2 percent security due February 2023 fell eight basis points to 17.80 percent, leaving the price at 31.225 percent of face value.

German Bunds

Germany’s 10-year bund yield was little changed at 1.34 percent, after dropping to 1.31 percent, matching the lowest since Aug. 31.

Two-year notes yielded minus 0.033 percent. The rate dropped to minus 0.055 percent on Nov. 7, the least since Aug. 13. A negative yield means investors who hold the security until it matures will receive less than they paid to buy it.

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations in Germany dropped to minus 15.7 from minus 11.5 in October. Economists had forecast an increase to minus 10, according to the median of 43 estimates in a Bloomberg News survey.

Austria’s 10-year rate fell as much as five basis points to 1.74 percent, the lowest since Bloomberg started collecting the data in 1993, while the yield on similar-maturity Belgian securities slipped to 2.232 percent, also the least since 1993.

French Gains

French 10-year bonds rose for a ninth day, the longest run of gains since the period ended Feb. 14, 1997, according to data compiled by Bloomberg. The yield on the securities tumbled as much as six basis points to 2.047 percent, approaching the record 2.002 percent reached on Aug. 3.

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

Dutch bonds rose, with the 10-year yield dropping one basis point to 1.60 percent, after the Netherlands sold 2.12 billion euros of securities due in 2022 at a record-low auction yield of 1.579 percent.

German bonds returned 4.1 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish securities gained 2.1 percent and Italian debt earned 17 percent.

To contact the reporters on this story: Neal Armstrong in London at narmstrong8@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

Spain’s 10-year yield increased four basis points, or 0.04 percentage point, to 5.93 percent as of 9:42 a.m. London time, after reaching 5.96 percent, the highest since Oct. 1. Photographer: Angel Navarrete/Bloomberg Nov. 13 (Bloomberg) -- Mark Dowding, a senior fixed-income portfolio manager at BlueBay Asset Management Ltd., discusses Greece's funding needs and his bond-markets strategy. He talks with Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg) Nov. 13 (Bloomberg) -- Luxembourg Prime Minister Jean-Claude Juncker and IMF Managing Director Christine Lagarde clashed in Brussels yesterday over the time allowed for Greece to reduce its deficit. Francine Lacqua reports on Bloomberg Television's "Countdown." (Source: Bloomberg)

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