Spain’s two-year notes advanced for the first time in five days after the nation’s borrowing costs fell at a bill sale, fueling optimism the nation can contain its debt crisis.
Italy’s notes also rose as it auctioned 3.75 billion euros ($4.71 billion) of zero-coupon and inflation-linked securities. Spain’s Prime Minister Mariano Rajoy is hosting European Union President Herman Van Rompuy for the first in a series of meetings aimed at helping the nation fulfill its funding needs. European Central Bank policy makers are due to decide on interest rates next week. Finland prepared to sell 4 billion euros of 10-year benchmark securities via banks.
The Spanish two-year yield fell eight basis points, or 0.08 percentage point, to 3.66 percent at 12:56 p.m. London time. The 4.75 percent note due July 2014 rose 0.145, or 1.45 euros per 1,000-euro face amount, to 101.960. Italy’s two-year note yield declined six basis points to 3.08 percent.
The Spanish Treasury sold 3.6 billion euros of bills today, more than the 3.5 billion euros sought. The yield for three- month securities fell to 0.946 percent from 2.434 percent at the last sale on July 24. That’s the least paid for three-month bills at auction since May 22. The rate on the six-month bills fell to 2.026 percent from 3.691 percent last month.
Yields on Spanish and Italian bonds have plunged to three- month lows on optimism the ECB and the single currency’s 17 members will agree on a plan to use short-dated sovereign debt purchases to curb governments’ borrowing costs and win them time to implement fiscal changes.
Spain’s Deputy Prime Minister Soraya Saenz de Santamaria said Aug. 24 that Rajoy has a full diplomatic agenda in the coming months as “Spain is working so that mechanisms guaranteeing the euro’s irreversibility are adopted.”
Italy sold 3 billion euros of zero-coupon 2014 debt to yield 3.064 percent, down from 4.86 percent at the previous auction on July 26. Investors bid for 1.95 times the amount offered, compared with 1.78 times last month.
Italy also sold 750 million euros of 2016 and 2019 inflation-linked bonds. The nation is scheduled to sell 9 billion euros of 181-day bills tomorrow, and as much as 7.5 billion euros of debt due in 2017 and 2022 on Aug. 30.
A German consumer-sentiment index will remain at 5.9 next month, Nuremberg-based GfK SE (GFK) said today. Economists predicted a decline to 5.8, according to the median of 25 estimates in a Bloomberg News survey.
Finland’s 10-year bonds will be priced to yield three basis points more than the mid-swap rate, according to a person familiar with the deal, who asked not to be identified because terms aren’t set. Finnish securities maturing in April 2021 yielded 1.52 percent.
The Bank of America Merrill Lynch Global Broad Market Index, which monitors fixed-income assets worldwide, has returned 0.06 percent this month. Less than two weeks ago the index was headed for its worst monthly performance since 2010.
German bonds have returned 3.8 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish securities fell 2.3 percent, while Italy’s gained 11 percent.
Volatility in Portuguese government debt was the highest in the euro area today, followed by Italy and Spain, according to measures of 10-year bonds, the spread between two- and 10-year securities, and credit default swaps.