Spanish and Italian 10-year bonds stayed higher as the ECB’s key rate was left at an all-time low of 0.75 percent, an outcome predicted in a survey of economists by Bloomberg. Policy makers have previously purchased more than 200 billion euros ($246 billion) of government bonds before it suspended its Securities Markets Program this year. Draghi will hold a press conference at 2:30 p.m. in Frankfurt to explain the decision.
“They’ve got their eyes on something bigger than a rate cut,” Eric Wand, a fixed-income strategist at Lloyds Banking Group Plc in London, said before the decision. “They need to do some form of enhanced SMP plus a combination of other short-term measures that they can enact, which will buy some time, but within those there needs to be some promise that we’re heading down the route to resolution.”
The German 10-year yield rose one basis point to 1.38 percent at 1:07 p.m. London time. The 1.75 percent bund due in July 2022 fell 0.100, or 1 euro per 1,000-euro face amount, to 103.415. The rate fell to match its June 1 record low of 1.127 percent on July 23. Two-year note yields increased two basis points to minus 0.051 percent.
Spain’s 10-year yield fell eight basis points to 6.66 percent, with Italy’s equivalent-maturity rate 11 basis points lower at 5.82 percent.
Draghi pledged last week to “do whatever it takes” within the central bank’s mandate to preserve the euro, stoking speculation policy makers will undertake measures including intervening in bond markets to support the region’s economies.
German 10-year yields dropped seven basis points to 1.38 percent when the central bank cut its rate 25 basis points to 0.75 percent on July 5.
Spain sold 3.13 billion euros of bonds, the Bank of Spain said, compared with a maximum target of 3 billion euros.
The Treasury in Madrid sold its 10-year benchmark bond at an average yield of 6.647 percent, compared with 6.43 percent when it was last auctioned on July 5. Notes maturing in October 2016 had an average yield of 5.971 percent, compared with 5.536 percent last month and July 2014 securities yielded 4.774 percent.
German debt has returned 3.6 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish securities lost 4.7 percent, while Italy’s debt rose 8.1 percent.
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