German bonds rose for the first time in six days amid speculation European Union finance ministers meeting today will fail to reach a deal on unlocking aid for Greece, boosting demand for the region’s safest assets.
Ten-year bund yields fell from the highest level in two weeks as a report showed German consumer confidence will drop for the first time in seven months in December after the euro- area debt crisis pushed the region into a recession. Spanish bonds were little changed as pro-independence parties in Catalonia won a regional vote. Belgian bonds advanced as the nation auctioned securities at record-low borrowing costs.
“Bunds do look rich at these levels but the selling pressure isn’t there and is unlikely to be there near term,” said Richard McGuire, a senior rates strategist at Rabobank International in London. The polls in Catalonia underlined “the ongoing momentum regarding Catalonian separatism, which is not a market positive,” he said.
German 10-year yields dropped two basis points, or 0.02 percentage point, to 1.41 percent at 4:33 p.m. London time, after rising to 1.45 percent on Nov. 23, the highest since Nov. 7. The 1.5 percent bond maturing in September 2022 gained 0.215, or 2.15 euros per 1,000-euro ($1,296) face amount, to 100.795.
Finance chiefs from the single-currency bloc started their meeting at 12:30 p.m. in Brussels, less than a week after an all-night gathering failed to yield agreement and days after a European Union summit broke up without a proposed seven-year budget. At stake is the continuation of a three-year mission to return Greece to financial health.
A breakthrough hinges on lawmakers coming up with 10 billion euros to fill Greece’s financing gap that emerged when the nation this month received two more years to meet deficit- reduction targets.
“It would be irresponsible not to reach an accord given all the efforts that have been made on all sides,” French Finance Minister Pierre Moscovici said late yesterday on BFM television. “I’m not going to guarantee that an accord will be reached, but I think the third time should be the charm.”
Greece’s debt will probably still be too large for the nation to bear even if European officials agree to repurchase government bonds and release a 44 billion-euro aid payment, according to Barclays Plc.
“Even a successful Greek debt buyback wouldn’t come close to achieving a sustainable Greek debt position,” Cagdas Aksu, a London-based rates strategist at Barclays, wrote in a client note published on Nov. 23.
GfK SE (GFK) said today its consumer-sentiment index for Germany, based on a survey of about 2,000 people, will fall to 5.9 from a revised 6.1 in November. That would be the first decline since May. Economists predicted a drop to 6.2 from GfK’s initial 6.3 estimate for November, according to the median of 27 estimates in a Bloomberg survey.
The yield on Belgium’s five-year securities decreased three basis points to 0.96 percent, while 10-year rates were two basis points lower at 2.28 percent, after sliding earlier to 2.27 percent, the least since Nov. 19.
Belgium sold almost 3.2 billion euros of bonds with maturities ranging from five to 10 years. The Brussels-based debt agency allotted 855 million euros of 10-year securities at an average yield of 2.252 percent, less than the previous record of 2.418 percent in last month’s auction. It also sold 655 million euros of five-year notes at 0.935 percent, down from 1.08 percent on Oct. 29, as well as debt maturing in 2019.
German bonds returned 3.4 percent this year through Nov. 23, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Belgian debt earned 14 percent.
Catalan President Artur Mas, who called early elections to force the debate on independence, won 50 of the 135 seats in the regional assembly for his Convergencia i Unio party, down from 62. The separatist Catalan Republican Left, known as the ERC, more than doubled its seats to 21 from 10. Two smaller parties that also back a plebiscite secured 16 seats.
The vote strengthened a drive for a referendum on secession in defiance of Spanish Prime Minister Mariano Rajoy, who said such a move is unconstitutional. Rajoy has been deliberating on whether to seek a bailout for the country.
The yield on Spain’s 10-year bonds was at 5.61 percent, after earlier rising as much as four basis points. The rate on similar-maturity Italian debt was also little changed, at 4.75 percent, after falling for four consecutive days.
Volatility on German bonds was the highest in euro-region markets, followed by those of France, according to measures of 10-year or equivalent-maturity debt, the spread between two- and 10-year securities, and credit default swaps.
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