Italy Auctions 10-Year Debt at Record-Low Yield Amid Bond Surge

Italy auctioned 10-year bonds at the lowest yield on record amid a rally in fixed-income assets that has reduced borrowing costs for governments around the world.

Austrian, Belgian and French yields slid to records amid speculation the European Central Bank will introduce further stimulus next week. A worldwide bond market surge pushed the yield on a composite index (BGSV) of bonds to the lowest in a year yesterday. Spanish securities halted a four-day advance that pushed 10-year yields to a record low yesterday.

“The key driver remains ECB speculation,” said Michael Leister, a senior fixed-income strategist at Commerzbank AG in London, “The yield didn’t come as a surprise, given the moves we’ve seen,” he said, referring to the Italian sale.

Italy sold 7.5 billion euros ($10.2 billion) of bonds maturing in five and 10 years. The Rome-based Treasury allotted 3 billion euros of debt due in September 2024 at an average yield of 3.01 percent, the lowest for similar-maturity securities since Bloomberg started compiling the data in 1991.

Italy’s 10-year yield increased two basis points, or 0.02 percentage point, to 2.96 percent at 4:17 p.m. London time after slipping to 2.885 percent on May 15, the least since Bloomberg began collecting the data in 1993. The 4.5 percent bond due in March 2024 fell 0.22, or 2.20 euros per 1,000-euro face amount, to 113.16.

Yields on similar-maturity Spanish bonds rose four basis points to 2.86 percent, having dropped to 2.798 percent yesterday, the least on record.

Global Bonds

The yield on the Bloomberg Global Developed Sovereign Bond Index slid to 1.28 percent yesterday, the least since May 2013. The gauge has returned 4.3 percent this year, while Treasuries returned 3.6 percent, based on Bloomberg indexes. Each of the 26 bond markets from Hungary to Japan tracked by Bloomberg and the European Federation of Financial Analysts Societies have gained during the past month.

Euro-area government bonds have advanced since ECB President Mario Draghi said on May 8 that the Governing Council was “comfortable” taking measures to boost inflation in the euro area. The ECB’s next policy decision is due on June 5.

The average yield to maturity on bonds from Greece, Ireland, Italy, Portugal and Spain fell to 2.13 percent yesterday, matching the least since the formation of the currency bloc in 1999, according to Bank of America Merrill Lynch indexes.

Italy sold 2.75 billion euros of May 2019 securities at a record-low 1.62 percent, compared with 1.84 percent at a previous sale on April 29. Italy also auctioned 1.75 billion euros of floating-rate notes due in November 2019.

French 30-year bond yields fell to 2.762 percent today, the lowest since at least 1990. Austrian five-year yields slid to 0.456 percent and Belgium’s 10-year rate declined to 1.849 percent, both all-time lows.

The yield on benchmark German 10-year bunds increased one basis point to 1.35 percent.

Italian government securities gained 7.5 percent this year through yesterday, according to Bloomberg World Bond Indexes. Germany’s returned 4.4 percent and Spain’s earned 8.4 percent.

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

To contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net Keith Jenkins, Lukanyo Mnyanda

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