Ten-year yields climbed from within a basis point of the lowest in a week and bunds underperformed most of their euro- region peers. Italian bonds fell after the European Commission forecast Europe’s economy will shrink in 2012 as nations battle to escape the debt crisis. An International Monetary Fund official said it will limit its loans to Greece to 30 billion euros ($40 billion).
“We’ve seen bunds come back a bit on the back of the Ifo,” said Orlando Green, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. “With the euro crisis there’s still uncertainty and many hurdles to clear. On the other hand, Germany, has been reasonably positive so that’s held bonds from continuing their rise.”
The 10-year German yield rose two basis points, or 0.02 percentage point, to 1.91 percent at 11:53 a.m. London time after falling to 1.89 yesterday, the lowest since Feb. 17. The 2 percent bond due January 2022 dropped 0.135, or 1.35 euros per 1,000-euro face amount, to 100.825.
Spanish 10-year bonds rose, pushing the yield down three basis points to 5.06 percent. The additional yield investors demand to hold the securities over bunds narrowed five basis points to 315 basis points.
The Ifo institute’s business climate index, based on a survey of 7,000 executives, climbed to 109.6 from 108.3 in January. That’s the highest reading since July and more than the 108.8 median estimate in a Bloomberg survey of analysts.
The 17-nation euro-bloc economy will contract 0.3 percent, the commission said, abandoning a November forecast of 0.5 percent growth. The downgrade was mainly due to projected contractions of 1.3 percent in Italy and 1 percent in Spain.
“While improvements in the Ifo survey are obviously a positive, so long as concerns remain over the growth outlook and longer term sustainability of public finances of many euro-zone states it’s unlikely to be sufficient to alter the safe-haven appeal of bunds,” said Brian Barry, an analyst at Investec Bank Plc in London.
Italian 10-year government bonds fell for a second day, pushing yields three basis points higher to 5.54 percent.
The IMF will seek to keep its exposure to Greece under a new bailout package at 30 billion euros, including money still owed from a previous loan, an official said yesterday. The organization has yet to announce its share of the 130 billion- euro bailout package for Greece agreed on two days ago.
The Greek March 2012 note rose to 26.75 percent of face value. It traded at 42 percent on Feb. 16.
Royal Bank of Scotland Group Plc, Commerzbank AG of Germany and France’s Credit Agricole SA all took writedowns on their Greek government debt two days after Greece’s private creditors agreed to a debt swap, paving the way for its second bailout.
RBS, Britain’s biggest government-owned lender, posted a wider-than-expected full-year loss after taking a sovereign-debt impairment of 1.1 billion pounds ($1.73 billion). The bank said it reduced its exposure to Greek, Italian, Irish, Portuguese and Spanish government debt by 90 percent last year.
Commerzbank, Germany’s second-biggest lender, booked a 700 million-euro writedown on Greek debt in the fourth quarter and Credit Agricole, France’s third-largest bank, reported a quarterly loss after booking 220 million euros in impairments on Greek debt.
German bunds have handed investors a loss of 0.2 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Greek securities fell 6.9 percent while Italian debt returned 9.3 percent, according to the indexes.
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