Portugal Notes in Longest Winning Run Since 2009 as Crisis Eases

Portugal’s two-year notes rose for a 10th day, the longest run of gains in three years, amid optimism the region’s debt crisis is easing.

The extra yield investors demand to hold the nation’s 10- year bonds instead of benchmark German bunds narrowed the least in four months. The euro area’s woes are “almost over,” Italian Prime Minister Mario Monti said today. Most Europe 10- year bonds rose after a report showed inflation in Germany, Europe’s largest economy, slowed in March, helping preserve the purchasing power of the fixed payments from debt.

“Portugal remains the most attractive of the high-yielding markets,” said Ciaran O’Hagan, head of euro-area rate strategy at Societe Generale SA in Paris. “The Portuguese market has been outperforming because there’s been no major news elsewhere in the euro area. It’s afforded a respite, allowing Portuguese spreads to narrow.”

The country’s two-year yield dropped 13 basis points, or 0.13 percentage point, to 9.37 percent at 4:47 p.m. London time after falling to 9.22 percent, the lowest since April 14. The 5.45 percent note due September 2013 rose 0.19, or 1.9 euros per 1,000-euro ($1,331) face amount, to 94.76. The 10-day run is the longest since February 2009.

Portugal’s 10-year yield fell 21 basis points to 11.25 percent. The spread over bunds narrowed 115 basis points to 9.42 percentage points after reaching 9.28, the least since Nov. 24. The measure set a euro-era record of 16.48 on Jan. 31.

Best Performer

Portuguese bonds have returned 13 percent this year, the most of 26 sovereign markets tracked by indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Italian debt gained 11 percent, while German bunds lost 0.2 percent.

Spanish bond advanced after Monti also said the risk of contagion from Spain has decreased following measures taken to boost Europe’s financial firewall.

European ministers will meet on March 30 in Copenhagen to discuss whether to combine the temporary European Financial Stability Facility with its permanent successor, the European Stability Mechanism.

Spain’s 10-year bond yield dropped two basis points to 5.33 percent after declining to 5.28 percent, the lowest level since March 21.

Italian bonds also advanced, with the yield falling one basis point to 5.11 percent. The Treasury sold 8.5 billion euros of six-month bills at a yield of 1.119 percent, the lowest since September 2010. Italy will sell as much as 8.25 billion euros of five- and 10-year securities tomorrow.

German inflation, calculated using a harmonized European Union method, eased to 2.3 percent this month from 2.5 percent in February, the Federal Statistics Office in Wiesbaden said.

The 10-year bund gained for a second day with the yield falling six basis points to 1.83 percent.

Volatility on Finnish bonds was the highest in euro-area markets today, followed by Dutch securities, according to measures of 10-year bonds, two- and 10-year yield spreads and credit-default swaps.

To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net.

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.