The European Financial Stability Facility issued 8 billion euros ($10.5 billion) of bonds amid strong investor demand in Asia, helping boost the euro to its highest levels in more than three weeks.
The European rescue fund sold 0.875 percent, five-year securities yesterday, according to data compiled by Bloomberg. Investors in Asia made up 29 percent of the buyer base, up from 5 percent on EFSF’s 4 billion euros of March 2016 bonds issued in February, according to a person familiar with the transaction, who asked not to be identified citing lack of authorization to speak publicly.
Speculation is rising that money will flow out of Japan in search of higher yields elsewhere after Bank of Japan (8301) Governor Haruhiko Kuroda said April 4 that the central bank will double its monthly bond purchases to 7.5 trillion yen ($76 billion). The move sent yields on 10-year Japanese government bonds to less than 0.5 percent, and pushed the yen to its weakest levels since 2009 against the dollar.
The euro touched $1.3103 yesterday, the most since March 15, before falling to $1.3083.
“I’m sure EFSF had some influence” on the euro’s rise, Brad Bechtel, managing director at Faros Trading LLC in Stamford, Connecticut, said in a telephone interview. The Bank of Japan “has definitely been a consistent driver for the past couple of days for sure. I would expect that to continue.”
About 200 investors requested orders totaling 14 billion euros on the bond sale, the EFSF said yesterday in a statement. It has a funding target of 16.5 billion euros in the second quarter.
BNP Paribas SA, Goldman Sachs Group Inc. and HSBC Holdings Plc managed the offering, Bloomberg data show.
Yields on peripheral European countries’ bonds have fallen relative to German bunds in the aftermath of the BOJ’s announcement of its unprecedented stimulus designed to double Japan’s monetary base within two years.
Spain’s 10-year bonds yield 4.71 percent, or 3.4 percentage points more than similar-maturity German bunds, compared with a spread of 3.6 percentage points a week ago. The gap for Italian securities tightened to 3.1 percentage points from 3.3 percentage points.
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