Italian, Spanish 10-Year Bonds Jump on ECB Loans; Portugal Notes Decline

Italy’s 10-year bonds rose for an eighth week, the longest run of gains in 14 years, after demand for the securities surged as the European Central Bank provided financial institutions with a second round of three-year loans.

Spanish 10-year (GSPG10YR) and two-year securities advanced for a third consecutive week after the Frankfurt-based central bank lent 800 financial institutions a greater-than-forecast 529.5 billion euros ($699 billion) through its longer-term refinancing operation, or LTRO. Portuguese two-year notes fell for the first time in five weeks even after the ECB was said to buy the nation’s securities. German bunds rose for a second week.

“The market thinks the LTRO is helping to ease the euro- crisis and this is contributing to a general mood of greater risk appetite,” said Allan von Mehren, chief analyst at Danske Bank A/S (DANSKE) in Copenhagen.

Italy’s 10-year (GBTPGR10) yield fell 57 basis points, or 0.57 percentage point, this week to 4.91 percent at 4:50 p.m. in London yesterday. The 5 percent bond due March 2022 rose 4.285, or 42.85 euros per 1,000-euro face amount, to 101.150.

The Italian 10-year rate has declined more than 2 percentage points over the past eight weeks, in the longest streak of declines since November 1998. It touched 4.90 percent on March 1, the lowest since Aug. 18.

Spain’s 10-year bond yield rose above Italy’s for the first time since August 2011. The Iberian nation’s benchmark yields dropped 15 basis points this week, while its two-year note yields fell 36 basis points to 2.25 percent.

Italian Notes

Italy’s two-year note yields have tumbled more than 4 percentage points to 1.75 percent since the ECB announced its plan to offer unlimited loans for three years on Dec. 8. Banks took 489 billion euros in the first operation later that month.

Portugal’s two-year note yields fell to a seven-week low yesterday after the ECB purchased the nation’s short-dated securities, according to four people with knowledge of the transactions who declined to be identified because the trades are confidential.

Two-year Portuguese rates rose 19 basis points to 13.11 percent. Longer-dated Portuguese debt slid, with the price of 10-year bonds falling to less than 50 percent of face value for the first time in almost a month. German 10-year bund yields declined eight basis points over the week to 1.80 percent.

Germany is scheduled to sell 4 billion euros of 0.75 percent securities maturing in 2017. The results of the auction will be published on March 7 at 10:30 a.m. London time. France and the Netherlands will sell bills on March 5 and Austria plans to auction 1.1 billion euros of 2022 bonds on March 6.

Italian bonds have handed investors a return of 13 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish bonds gained 3 percent, Portugal’s bonds have returned 2 percent and German bunds are little changed, the indexes show.

To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net.

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

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