Italy’s bonds rose, with 10-year yields falling toward the lowest in seven weeks, as the Treasury said it would close an inflation-linked debt sale to individual investors two days early after demand increased.
German bunds dropped for the first time in four days as a euro-area report showed so-called core consumer prices fell more than economists forecast, damping speculation the European Central Bank will cut interest rates at its next meeting. Portugal’s bonds advanced for a fifth day after the nation won extra time from European finance ministers last week to pay back emergency loans.
“Italy is outperforming on the back of the inflation- linked sale,” said Gianluca Ziglio, executive director of fixed-income research at Sunrise Brokers LLP in London. “ECB action is all about inflation. The core figure was stronger than expected, it defuses the risk of an ECB cut for the moment. That’s why German yields are rising.”
Italy’s 10-year yield fell three basis points, or 0.03 percentage point, to 4.31 percent at 5 p.m. London time after dropping to 4.26 percent on April 8, the lowest level since Feb. 25. The 5.5 percent bond due November 2022 gained 0.215, or 2.15 euros per 1,000-euro ($1,313) face amount, to 109.57.
The Rome-based Treasury said it would end the sale of the four-year inflation-linked bonds to retail investors today after orders climbed to 8.98 billion euros yesterday, more than three times the 2.48 billion euros on the first day of the previous sale of the securities in October.
Investors ordered another 8 billion euros of the debt today. The Treasury had initially planned to take orders through April 18.
Spain sold 5.07 billion euros of six- and 12-month bills today, exceeding its maximum target of 5 billion euros. The nation’s 10-year yield was little changed at 4.73 percent.
German bunds declined as the European Union’s statistics office said the euro-area core inflation rate, which excludes volatile costs such as energy, alcohol and tobacco, climbed to 1.5 percent in March from 1.3 percent the previous month. The median estimate in a Bloomberg News survey was 1.4 percent.
The 10-year bund yield climbed three basis points to 1.28 percent after dropping to 1.20 percent on April 5, the lowest level since July 24.
A separate report from the ZEW Center for European Economic Research showed German investor sentiment worsened more than economists predicted in April.
Volatility on Portuguese bonds was the highest in euro-area markets today followed by those of Finland and Germany, according to measures of 10-year debt, the yield spread between two- and 10-year securities, and credit-default swaps.
Portuguese 10-year yields declined 15 basis points to 6.10 percent after falling to 6.08 percent, the lowest since March 26. The rate has fallen 36 basis points in the past five days.
European finance ministers meeting in Dublin on April 12 gave Portugal seven extra years to repay creditors as long as it enacts new budget cuts to make up for savings that were thrown out by the country’s highest court on April 5.
German bonds returned 0.8 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish debt gained 5 percent and Italy’s rose 2 percent.
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