European government bonds advanced after Federal Reserve minutes damped speculation U.S. policy makers are moving toward raising interest rates, and as Greece returned to debt markets for the first time since 2010.
Italian bonds gained for a second day and Belgian, French and German securities also rallied. Greek bonds fell, pushing 10-year yields up from near the lowest level since February 2010, as the nation agreed to sell 3 billion euros ($4.17 billion) of five-year notes via banks. Greece received about 600 orders for a total of around 20 billion euros, a person familiar with the sale said. Ireland auctioned 1 billion euros of 10-year debt at a record-low yield.
“Bond markets have woken up on a positive note on the back of a dovish set of Fed minutes,” said Richard McGuire, a fixed-income strategist at Rabobank International in London. “This is a classic case of an improving liquidity outlook raising all boats. The strong demand for Greece’s five-year issue is symptomatic of a positive liquidity outlook trumping more fundamental concern.”
Italy’s 10-year yield declined four basis points, or 0.04 percentage point, to 3.17 percent at the 5 p.m. close in London after dropping to a record 3.142 percent on April 7. The 4.5 percent bond due March 2024 gained 0.31, or 3.10 euros per 1,000-euro face amount, to 111.46.
Similar-maturity Belgian yields dropped six basis points to 2.15 percent, those on French debt fell six basis points to 2.02 percent and Germany’s (GDBR10) slipped six basis points to 1.52 percent.
Minutes of the Fed’s March 18-19 meeting published yesterday showed some policy makers expressed concern that interest-rate forecasts among central bankers “could be misconstrued as indicating a move by the committee to a less accommodative” stance.
Fed officials last month increased their projections for gains in the labor market and predicted the main interest rate will rise to 1 percent by the end of 2015.
Greek 10-year bonds fell for the first time in thee days, with yields climbing five basis points to 5.94 percent after declining to 5.80 percent yesterday.
The Athens-based Finance Ministry said in an e-mailed statement the country is selling 3 billion euros of 4.75 percent notes due in April 2019. “Participation of long-term investors outside Greece is expected to approach 90 percent,” the ministry said.
The securities will be priced to yield 4.95 percent, said a person familiar with the matter, who asked not to be identified because they weren’t authorized to speak publicly. A Greek government official told reporters in Athens yesterday the country sought to raise 2.5 billion euros.
“Greece’s sale is a sign of how much investor optimism has returned,” Christian Lenk, a fixed-income analyst at DZ Bank AG in Frankfurt, said yesterday. Traders “aren’t shying away from investments of this type any more,” he said.
Greece, the country that sparked Europe’s sovereign-debt crisis in 2009 after saying its deficit was bigger than previously thought, last sold bonds in March 2010. It has received two financial rescues and swapped existing securities for new 2 percent bonds maturing between 2023 and 2042 as part of the world’s biggest sovereign-debt restructuring in 2012.
“Today we return to the bond markets after four years,” Greek Finance Minister Yannis Stournaras said at a conference in Athens. “The real economy is showing encouraging signs of recovery.”
The return of Greece to debt markets is the latest milestone on the euro area’s path to recovery following a debt crisis that pushed borrowing costs to record highs.
The average yield to maturity on bonds from Greece, Ireland, Italy, Portugal and Spain fell to 2.25 percent on April 4, the lowest in the history of the currency bloc, according to Bank of America Merrill Lynch indexes. The yield rose to 9.55 percent in 2011 and was at 2.26 percent yesterday.
Ireland, which emerged from its bailout program in December, sold bonds due in March 2024 at an average yield of 2.917 percent, the lowest for 10-year debt since at least 2000 and down from 2.967 percent at a previous auction on March 13.
The Irish 10-year yield dropped three basis points to 2.92 percent after declining to 2.894 percent, the lowest level since Bloomberg began tracking the securities in 1991.
Greek bonds returned 33 percent this year through yesterday, the best performer of 15 euro-area debt markets tracked by Bloomberg World Bond Indexes. Irish securities gained 5 percent and Italy’s earned 5.9 percent.