Irish, Portuguese Bonds Decline on Deficit, Political Concerns
Irish, Portuguese Bonds Fall on Deficit, Political Concern
Simon Dawson/Bloomberg
Ireland and Portugal led so-called peripheral European bond markets lower amid renewed concern that countries will struggle to cut their budget deficits.
Ireland and Portugal led so-called peripheral European bond markets lower amid renewed concern that countries will struggle to cut their budget deficits. Photographer: Simon Dawson/Bloomberg
Ireland and Portugal led so-called peripheral European bond markets lower amid renewed concern that countries will struggle to cut their budget deficits.
The extra yield, or spread, investors demand to hold Irish 10-year bonds instead of similar-maturity German bunds rose to within two basis points of its euro-era record before narrowing. A group of Anglo Irish Bank Corp.’s creditors said they won’t take part in a debt swap proposed by the lender. Portugal’s biggest opposition party, which ended budget talks with the ruling Socialist Party yesterday, led the government by a wider margin in a survey of voter intentions, TSF radio reported.
“The periphery is very nervous and the near-term widening pressure will not fade,” said Matteo Regesta, an interest-rate strategist at BNP Paribas SA in London. “The markets don’t like the cul-de-sac plaguing Portuguese decision making.”
The yield on Ireland’s 10-year bonds increased five basis points to 6.94 percent as of 4:08 p.m. in London, adding to a 32-basis-point advance yesterday. The notes yielded 426 basis points more than German bunds, up five basis points from yesterday. Earlier, the spread widened to 452 points, near last month’s high of 454. Portugal’s 10-year bond yield rose seven basis points, with the spread over similar German securities at 338 basis points.
ECB Irish Purchases
The European Central Bank bought Irish government bonds today, according to three traders and strategists with knowledge of the transactions. The ECB purchased debt maturing between 2011 and 2020, one trader said, under condition of anonymity because the deals are confidential. A central bank spokesman declined to comment when contacted by telephone in Frankfurt.
A group of noteholders who hold about 690 million euros ($959 million) of lower Tier 2 Anglo Irish Bank notes, plan to vote against an offer to exchange 1.6 billion euros of subordinated debt for new bonds at 20 cents on the euro to generate capital, investment bank Houlihan Lokey said in an e- mailed statement late yesterday, contributing to a decline in Irish bonds today.
Portugal’s opposition Social Democratic Party led by Pedro Passos Coelho had 42 percent backing from voters, 4 percentage points more than in a September survey. The poll indicated 25 percent support for the Socialists, 11 percentage points lower than the previous survey, according to TSF radio station.
German bonds declined as a report showed European confidence in the economic outlook improved more than economists forecast in October.
Italian Sale
An index of executive and consumer sentiment in the 16 euro nations rose to 104.1 from 103.2 in September, the European Commission in Brussels said in a statement today. That’s the highest since December 2007 and exceeded economists’ forecast for a reading of 103.5, based on the median of 26 estimates in a Bloomberg News survey. Manufacturers grew more confident as orders and output improved.
The yield on the 10-year bund, Europe’s benchmark security, rose one basis point to 2.56 percent. The two-year note yield also increased, by three basis points to 1.04 percent.
German bonds have gained 7.7 percent this year, compared with an 8.1 percent advance by U.S. Treasuries, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Portugal’s securities have lost 4.6 percent while those of Ireland slumped by 5.3 percent.
Italian 10-year bonds were little changed after the country sold 7.25 billion euros of securities maturing in 2013 and 2021. The yield was at 3.93 percent.
The country’s offering of 3.25 billion euros of 2021 bonds attracted bids equivalent to 1.41 times the amount sold, little changed from the so-called bid-to-cover ratio of 1.48 times achieved at a Sept. 29 sale. Investors bid for 1.34 times the 4 billion euros of 2013 securities on offer today.
“Overall the result looks good and confirms that appetite for Italian paper remains sound,” Chiara Cremonesi, a market strategist at UniCredit SpA in London, wrote in a client note.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
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