Italian, Spanish Bonds Advance as China, U.K. Outlooks Improve

Italian and Spanish 10-year bonds climbed for a third day after a report showed Chinese exports to Europe increased for the first time in five months, adding to signs the region’s economy is gathering pace.

Germany’s bonds advanced for a second day as Fitch Ratings affirmed its AAA rating with stable outlook. China’s exports and imports rebounded more than analysts estimated in July in a sign that the world’s second-largest economy is stabilizing. The Bank of England yesterday raised its growth forecasts for the U.K. while pledging to keep inflation low.

“The Chinese export data to Europe is significant in that it suggested the economic recovery here may be stronger than we thought,” said Soeren Moerch, head of fixed-income trading at Danske Bank A/S (DANSKE) in Copenhagen. “That and the improved outlook of the U.K., the region’s major trading partner plus low inflation are supporting euro-region bonds, especially peripherals.”

The yield on Italian 10-year bonds dropped two basis points, or 0.02 percentage point, to 4.24 percent at 8:39 a.m. London time. The 4.5 percent security due in May 2023 rose 0.115, or 1.15 euros per 1,000-euro ($1,336) face amount, to 102.39. Similar-maturity Spanish bond yields dropped one basis point to 4.56 percent.

China’s shipments abroad rose 5.1 percent from a year earlier, the General Administration of Customs in Beijing said. That compares with the median estimate for a 2 percent increase. Exports to the U.S. and European Union, China’s biggest markets, rose for the first time in five months.

The 10-year bund yield fell three basis points to 1.66 percent. The rate touched 1.73 percent on Aug. 2, the most since July 5.

Italian securities returned 4 percent this year through yesterday, according to Bloomberg World Bond Indexes. German bonds lost 1.4 percent and Spain’s gained 6.9 percent.

To contact the reporter on this story: 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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