Spanish Bonds Rise a 4th Day on Bailout Speculation

Spain’s 10-year bonds advanced for a fourth day, the longest streak of gains in three weeks, amid speculation the nation is preparing to seek a sovereign bailout that will trigger European Central Bank purchases of its debt.

Two-year Spanish yields slid to the lowest level in a week after Economy Minister Luis de Guindos said Spain is studying the ECB’s bond-buying proposal, having met with European Economic and Monetary Affairs Commissioner Olli Rehn yesterday. German 10-year bunds pared losses after Prime Minister Mariano Rajoy said a request for aid was not imminent. Austrian bonds rose after the nation sold 1.32 billion euros ($1.7 billion) of securities maturing in 2019 and 2044.

“The market thinks that Spain asking for aid is just a matter of time,” said Anders Moeller Lumholtz, an analyst at Danske Bank A/S (DANSKE) in Copenhagen. “This would be positive for the bonds and we see it happening within the next couple of weeks.”

Spain’s 10-year bond yields declined 13 basis points, or 0.13 percentage point, to 5.75 percent at 4:43 p.m. London time, after reaching 5.72 percent, the lowest since Sept. 25. The 5.85 percent security maturing in January 2022 rose 0.93 or 9.30 euros per 1,000-euro face amount, to 100.685. Two-year note yields fell 14 basis points to 3.17 percent, after dropping to 3.15 percent, also the lowest since Sept. 25.

Rajoy, who spent six months campaigning for ECB President Mario Draghi to buy bonds, has been weighing the benefits of seeking aid since Aug. 2.

‘Let’s Do it’

Spain should seek a bailout as soon as possible, Bankinter SA (BKT) Chief Executive Office Maria Dolores Dancausa told broadcaster Antena 3 in an interview today.

“If we have to ask for external financing, let’s do it and let’s do it as soon as possible,” Dancausa said in a recording of the interview.

Spanish bonds stayed higher even after a report showed the country’s registered unemployment rose for a second month in September. The number of people claiming jobless benefits rose by 79,645 from August to 4.7 million, according to data today from the Labor Ministry.

The ECB will meet in Ljubljana, Slovenia, to review monetary policy on Oct. 4. Forty-nine of 52 analysts surveyed by Bloomberg predict the central bank will keep its benchmark interest rate at a record-low 0.75 percent. Three analysts said the ECB will cut the rate by 25 basis points to 0.5 percent.

German Yields

Germany’s 10-year yield was little changed at 1.46 percent after rising to 1.49 percent. The two-year note yield was little changed at 0.04 percent.

Factory-gate prices in the 17-nation euro region rose 2.7 percent from a year earlier, after increasing a revised 1.6 percent in July, the European Union’s statistics office in Luxembourg said today. Economists had forecast an increase of 2.6 percent, the median of 13 estimates in a Bloomberg News survey showed.

Austria sold 550 million euros of notes maturing in 2019 at an average yield of 1.326 percent in an auction today, down from 1.344 percent at a sale of the securities last month, the Austrian Federal Financing Agency said on its website. The nation also sold 770 million euros of 2044 bonds at an average yield of 2.88 percent.

Austria’s seven-year note yields were little changed at 1.36 percent after falling to 1.35 percent. The 30-year bond yield dropped two basis points to 2.90 percent.

Portuguese 10-year bond yields dropped one basis point to 8.92 percent. The country’s debt agency IGCP said today it plans to carry out an offer to exchange bonds tomorrow as it seeks to regain access to the markets.

The agency will offer to buy securities maturing in September 2013 and will sell bonds maturing in October 2015, the Lisbon-based IGCP said today in a statement on its website. The IGCP plans to carry out the offer at 10:30 a.m.

Volatility on Irish bonds was the highest in euro-region markets today, followed by Dutch and Italian securities, according to measures of 10-year bonds, the spread between two- and 10-year securities, and credit default swaps.

To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Emma Charlton in London at echarlton1@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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