Portuguese government securities dropped, with two-year yields rising the most in five weeks, on bets the nation will sell bonds for the first time since its international bailout after Ireland sold debt yesterday.
Portugal’s two-year notes dropped for a fourth day on concern the supply of the securities will increase after Ireland raised 2.5 billion euros ($3.27 billion) in its first so-called syndicated sale in three years. Germany’s 10-year bunds rose for a third day as a report showed the nation’s industrial production rose less than economists predicted in November, boosting demand for the euro area’s safest assets. Spanish bonds fell before an auction tomorrow.
Portugal’s securities have fallen amid “speculation that it, too, may follow Ireland in selling bonds through banks,” said Soeren Moerch, head of government bond trading at Danske Bank A/S (DANSKE) in Copenhagen. “We recommend that investors buy them into weakness.”
The yield on Portuguese two-year notes rose 11 basis points, or 0.11 percentage point, to 3.90 percent as of 4:26 p.m. London time. It earlier climbed as much as 43 basis points, the most since Nov. 30. The 3.6 percent security maturing in October 2014 fell 0.185, or 1.85 euros per 1,000-euro face amount, to 99.525.
The 10-year rate was three basis points higher at 6.49 percent after rising 24 basis points, the biggest increase since Nov. 9. Portugal last sold 10-year securities on Jan. 12, 2011, at an average yield of 6.72 percent, according to data compiled by Bloomberg.
Ireland attracted around 7 billion euros of orders for its five-year notes, the Dublin-based National Treasury Management Agency said in a statement yesterday. Prime Minister Enda Kenny said the sale was a success and a sign that investors “are looking at Ireland and see that the country has made progress.”
Irish five-year notes rose for a second day as the head of the country’s debt management agency said he will meet with investors next month to gauge their appetite for government securities after yesterday’s sale.
Investors are “voting with their money” on Ireland while speculative players or “fast money” have gone, John Corrigan, the NTMA’s Chief Executive Officer, told reporters in Dublin today.
The yield on Irish notes maturing in October 2017 fell four basis points to 3.18 percent.
German 10-year bund yields declined one basis point to 1.48 percent, after dropping four basis points in the past two days. The rate climbed to 1.56 percent on Jan. 4, the highest since Oct. 26.
German output rose 0.2 percent from October, when it fell a revised 2 percent, the Economy Ministry in Berlin said. Economists had forecast a gain of 1 percent, according to the median of 23 estimates in a Bloomberg News survey.
“The omens are for a slightly better environment in 2013,” said Piet Lammens, head of research at KBC Bank NV in Brussels. “Last week we saw a sharp move higher in bund yields, which was a repositioning of investors into the new year. We don’t see the move higher in the bunds price early this week as important from a longer-term perspective.”
Germany’s Federal Finance Agency sold 5 billion euros of 0.5 percent securities due in February 2018 at an average yield of 0.53 percent, compared with 0.41 percent at the previous auction of similar-maturity notes on Nov. 28.
ECB policy makers will keep the main refinancing rate at a record-low 0.75 percent tomorrow, according to the median forecast of 55 analysts in a separate Bloomberg survey. Five predict the central bank will lower the rate to 0.5 percent.
Volatility on Italian bonds was the highest in euro-region markets today, followed by Greece and Spain, according to measures of 10-year or equivalent-maturity debt, the spread between two-and 10-year securities, and credit default swaps.
Spain is scheduled to sell as much as 5 billion euros of government debt tomorrow at its first auction this year. It plans to sell a new 2.75 percent note due in 2015, as well as securities maturing in 2018 and 2026.
The Spanish 10-year bond yield rose five basis points to 5.12 percent. The rate on similar-maturity Italian debt was little changed at 4.27 percent.
German bonds lost 1.1 percent this month through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Portuguese debt fell 0.7 percent, while Spanish securities gained 1.3 percent, the indexes show.