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Spanish Bonds Advance on Greek Deal; Bunds Gain on Fiscal Cliff

December 01, 2012

Spain’s bonds rose this week, with yields falling the most in almost three months, as an agreement by euro-area ministers to ease the terms of aid to Greece boosted demand for the debt of so-called peripheral nations.

Italy’s government securities gained for a third week as signs the region’s financial crisis is easing pushed down borrowing costs at an auction. Greek bonds rose as the ministers cleared the country to receive a 34.4 billion euros ($44.5 billion) of aid in December. German bunds rallied as speculation U.S. lawmakers will fail to reach agreement on avoiding the fiscal cliff of tax increases and spending cuts boosted demand for the region’s safest assets.

“It’s a case of two factors being in play,” said Richard McGuire, a senior rates strategist at Rabobank International in London. “One being concern over the U.S. fiscal cliff ensuring that there is a bit for safe havens, and the second is money being put to work in Spain and Italy being triggered by a decline in specific concerns related to Europe.”

The Spanish 10-year yield fell 30 basis points, or 0.30 percentage point, this week to 5.32 percent at 5 p.m. in London yesterday, the biggest decline since the period ended Sept. 7. The 5.85 percent note due in January 2022 gained 2.17, or 21.70 euros per 1,000-euro face amount, to 103.765.

Similar-maturity Italian yields dropped 25 basis points to 4.50 percent after declining to 4.47 percent on Nov. 29, the lowest level since December 2010.

Greece Agreement

European officials meeting in Brussels announced on Nov. 27 they would cut the rates on Greek bailout loans, suspend interest payments, give the nation more time to repay, and engineer a bond buyback.

Greek bonds due in February 2023 rose for a fourth week, with the yield dropping 35 basis points to 16.13 percent. The price increased to 35.27 percent of face value.

Italy sold 3 billion euros of its benchmark 10-year bonds on Nov. 29 at a yield of 4.45 percent, the lowest since November 2010. The Rome-based Treasury also sold 3 billion euros of a five-year note at 3.23 percent, the least since October 2010.

Bunds advanced as U.S. Congressional Republicans dug in to fight President Barack Obama’s plan to avert the fiscal cliff, rejecting his tax-and-spending proposal.

The German 10-year yield declined five basis points this week to 1.39 percent.

Austria’s 10-year yield dropped to a record 1.732 percent this week and Belgium’s fell to 2.15 percent, the least since Bloomberg began collecting data on the securities in 1993.

The European Central Bank meets to decide monetary policy on Dec. 6. Spain is scheduled to auction bonds due in 2015, 2019 and 2022 on Dec. 5, and Germany will sell two-year notes. France will auction debt maturing in 2018, 2019 and 2027 the next day.

To contact the reporter on this story: Lucy Meakin in London at

To contact the editor responsible for this story: Paul Dobson at

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