Spain, Italy Bonds Gain With Stocks as Germany’s Bunds Decline

Spanish government bonds advanced for the first time in three days after the biggest selloff in seven months last week.

Italian bonds rose as European equities climbed. Germany’s bunds declined as the nation alloted 2.125 billion euros ($2.8 billion) of 12-month bills at an auction. France’s two-year notes were little changed as the country sold 7.79 billion euros of securities due between three and 12 months. Markets in the U.K. and U.S. are closed for public holidays.

“The overall trend for lower yields remains in place,” said Allan von Mehren, chief analyst at Danske Bank A/S (DANSKE) in Copenhagen. “There’s still a hunt for yield and a lot of liquidity in the system. All eyes are going to be on how European equities are holding up.”

Spain (GSPG10YR)’s 10-year bond yield fell nine basis points, or 0.09 percentage point, to 4.33 percent at 4:06 p.m. London time. The yield climbed 21 basis points last week, the most since the period ending Oct. 26. The 5.4 percent security due in January 2023 advanced 0.705, or 7.05 euros per 1,000-euro face amount, to 108.275.

The rate on similar-maturity Italian (GBTPGR10) bonds also dropped nine basis points, to 4.05 percent.

The Stoxx Europe 600 Index gained 0.2 percent after sliding 1.7 percent last week. Spanish 10-year bonds have moved in the same direction as Europe’s benchmark stock index for each of the last seven trading days.

German Auction

Germany’s 10-year yield increased three basis points to 1.46 percent. Yields rose to 1.47 percent on May 24, the highest since March 15.

Germany auctioned one-year bills to yield 0.001 percent, compared with 0.002 percent on April 29.

The Netherlands is scheduled to sell as much as 3 billion euros of 10-year bonds tomorrow, while Belgium and Italy are also due to sell debt.

The yield on French two-year notes was 0.24 percent.

Volatility on Austrian bonds was the highest in euro-area markets today followed by those of Belgium and the Netherlands, according to measures of 10-year debt, the yield spread between two- and 10-year securities, and credit-default swaps.

German government bonds handed investors a loss of 1 percent this month through May 24, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. French securities slipped 0.7 percent and Spanish debt dropped 1.5 percent.

To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net

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

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