Euro-area bonds rose, led by peripheral nations such as Italy and Spain (GSPG10YR), as European Central Bank President Mario Draghi’s pledge that monetary policy will stay accommodative boosted the appeal of fixed-income assets.
Germany’s 10-year bund yield fell the most in three months after Draghi told the French National Assembly that policy makers stood ready to act to support growth in the region. Italy’s 10-year yield dropped from the highest level in four months before the nation sells up to 5 billion euros ($6.51 billion) of five- and 10-year securities tomorrow.
“This is a reflection that the market is expecting more” from the ECB, said Michael Leister, an interest-rate strategist at Commerzbank AG in London. “On the European side, rates have overshot. There is good value in European fixed income.”
Italy’s 10-year yield fell 15 basis points, or 0.15 percentage point, to 4.71 percent at 4:32 p.m. London time after climbing to 4.93 percent, the highest level since Feb. 27. The 4.5 percent bond due in May 2023 rose 1.135, or 11.35 euros per 1,000-euro face amount, to 98.8.
Spain’s 10-year yield dropped 22 basis points to 4.85 percent, the biggest one-day decline on a closing basis since Jan. 10. Portugal’s 10-year yield fell 24 basis points to 6.66 percent and Greece’s slipped 44 basis points to 10.99 percent.
The ECB’s monetary policy “will stay accommodative for the foreseeable future,” Draghi said in Paris. “We have an open mind about all other possible instruments that we may consider proper to adopt.” An exit remains “very distant,” he told reporters at a press conference.
Germany (GDBR10)’s 10-year bund yield dropped five basis points to 1.76 percent, the biggest decline since March 27. The rate climbed to 1.85 percent on June 24, the highest level since April 4, 2012.
Euro-area sovereign bonds have slumped since Federal Reserve Chairman Ben S. Bernanke said on June 19 the U.S. may slow asset purchases this year and end them in mid-2014. Government securities around the world are poised for their worst quarter since at least 1997, according to Bank of America Merrill Lynch indexes.
Securities in the Bank of America Merrill Lynch Global Broad Market Sovereign Plus Index fell 2.30 percent this quarter through yesterday, set for the worst performance since the indexes began tracking the data on Dec. 31, 1996. While the average yield on the securities has climbed to 1.79 percent from 1.43 percent on March 31, it is still below the average of 2.06 percent for the past five years.
Volatility on Belgian bonds was the highest in euro-area markets today followed by those of Finland and Austria, according to measures of 10-year debt, the yield spread between two- and 10-year securities, and credit-default swaps.
Italy’s Treasury sold 8 billion euros of six-month bills today at an average yield of 1.052 percent, compared with 0.538 percent at a previous sale of the securities on May 29.
Italian securities returned 0.1 percent this year through yesterday, according to Bloomberg World Bond Indexes. Spanish bonds gained 3.6 percent, while German securities handed investors a loss of 2.1 percent.
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