Portugal’s government bonds advanced, with 10-year yields dropping below 5 percent for the first time since August 2010, as a recovery in the region’s most indebted economies attracted investors.
The nation’s February 2024 securities rose for an eighth day, improving the prospect it will regain full market access as the end of its 78 billion-euro ($105.5 billion) rescue program from the European Union and International Monetary Fund approaches. Ireland’s bonds rallied for a fifth day after Moody’s Investors Service raised its credit rating on the nation to investment grade last week. Spanish and Italian bonds declined.
“The ratings have held up and the country is now self-financing,” Steven Major, head of global fixed-income research at HSBC Holdings Plc in London, said on Bloomberg Television’s “The Pulse” in an interview with Anna Edwards. “There’s a hunt for yield and once the Irish bonds are too expensive, money then goes into Portugal. There’s this virtuous circle.”
Portugal’s 10-year yield fell five basis points, or 0.05 percentage point, to 5.06 percent at 4:25 p.m. London time after dropping to 4.95 percent, the lowest level since June 2010. The 5.65 percent bond due in February 2024 rose 0.375, or 3.75 euros per 1,000-euro face amount, to 104.54.
Bond yields in the euro area’s peripheral nations are falling as their economies recover from the debt crisis that pushed borrowing costs up to records. Portugal’s 10-year yield has dropped from 18.29 percent in January 2012. Ireland’s bonds returned more than 100 percent since Moody’s stripped the nation of its investment-grade rating in July 2011.
Ireland’s 10-year yield was little changed at 3.25 percent after dropping to 3.21 percent, the lowest level since October 2005.
Spain’s 10-year bonds snapped a five-day advance amid speculation the nation will sell a new security through banks.
The Spanish Treasury will probably issue 6 billion euros of a new 10-year benchmark this week, Joakim Tiberg, a strategist at UBS AG in London, wrote in an e-mailed note.
“There are reported expectations of some supply in that market, so that’s generating a bit of selling pressure,” said Peter Chatwell, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. “We have it in our expectations a 10-year bond could come some time, maybe this week or next week. There’s a big redemption at the end of the month so there’s a favourable environment to launch a new benchmark.”
Spain’s 10-year yield rose five basis points to 3.73 percent after dropping to 3.64 percent yesterday, the lowest level since September 2006. Italy’s 10-year rate climbed four basis points to 3.83 percent.
Volatility on Italian bonds was the highest in euro-area markets today, followed by those of Ireland and Germany, according to measures of 10-year debt, the yield spread between two- and 10-year securities and credit-default swaps.
The rate on German 10-year bunds was little changed at 1.74 percent.
Portugal’s bonds returned 13 percent in the past year through yesterday, the second best performer after Greece of 15 euro-area debt markets tracked by Bloomberg World Bond Indexes. Ireland’s securities earned 12 percent, while German bunds rose 0.2 percent.