German Government Bonds Drop as Portuguese, Irish Debt Securities Rebound
German government bonds fell for the first day in four as Portuguese and Irish debt yields retreated from record highs relative to bunds amid renewed appetite for securities from the euro area’s periphery.
The declines pared a weekly advance after concern flared this week that political opposition and a slower economic recovery may dent efforts to rein in the region’s biggest budget deficits, stoking demand for the safest fixed-income assets. The Spanish-German yield spread also narrowed after the nation said it will raise taxes on the highest earners and cut spending.
“We’ve seen some support coming in” for peripheral debt, said Mohit Kumar, a fixed-income strategist at Deutsche Bank AG in London. “From a fundamental point of view the spread looks quite attractive” for Ireland, he said.
The bund yield rose 5 basis points to 2.33 percent at 4 p.m. in London, paring the weekly drop to 9 basis points. The 2.25 percent bond due in September 2020 fell 0.39, or 3.90 euro cents per 1,000-euro ($1,347) face amount, to 99.28.
The difference in yield, or spread, between Portuguese 10- year bonds and bunds was little changed at 402 basis points after widening to as much as 420 basis points. The Irish spread was also little changed, at 417 basis points, after reaching 430 basis points.
To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
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