Italian and Spanish bonds rose after investors with 58 percent of the Greek bonds eligible for the nation’s debt swap indicated they’ll participate, boosting demand for the region’s higher-yielding assets.
Italy’s 10-year yields fell toward the lowest since August after a member of a committee of private bondholders who negotiated the deal said he expects holders of more than 80 percent of Greece’s bonds to sign up to the exchange. German 10-year yields were two basis points from a seven-week low after a report showed factory orders unexpectedly fell in January. Germany sold 3.3 billion euros ($4.33 billion) of five-year notes at a record-low yield.
“The news related to the Greek deal isn’t fantastic but there’s nothing that looks like it might be derailing the whole thing,” which is helping Italian and Spanish debt, said Marc Ostwald, a strategist at Monument Securities Ltd. in London. “The German factory orders don’t make for great reading, there’s a loss of momentum and that means there are a lot of people who are a little bit wary.”
Italy’s 10-year yield fell 12 basis points, or 0.12 percentage point, to 4.95 percent at 4:17 p.m. London time after dropping to 4.89 percent on March 2, the lowest since Aug. 18. The 5 percent bond maturing in March 2022 gained 0.92, or 9.20 euros per 1,000-euro face-amount, to 100.865.
The Spanish 10-year yield declined five basis points to 5.1 percent, and similar-maturity French yields dropped four basis points to 2.84 percent.
Greece’s largest banks, most of the country’s pension funds, and more than 30 European banks and insurers including BNP Paribas SA, Commerzbank AG and Assicurazioni Generali SpA have pledged to accept the offer. That brings the total so far to at least 120 billion euros, based on data compiled by Bloomberg from company reports and government statements.
Hans Humes, president of Greylock Capital Management in New York, told Bloomberg Television he expects holders of more than 80 percent of Greece’s government bonds to accede to the swap. The goal of the plan is to reduce the 206 billion euros of privately held Greek debt by 53.5 percent. The offer will end tomorrow evening in Athens.
The price of the Greek note maturing on March 20 jumped 7.28 to 28.8 percent of face value as some investors bet the security may not be included in the swap. Patrick Armstrong, managing partner at Armstrong Investment Managers in London, said in a Bloomberg Television interview he won’t voluntarily join the exchange because of the “minuscule” chance the bond will be redeemed at face value.
Ten-year German yields were little changed at 1.78 percent after declining to 1.77 percent, the lowest level since Jan. 16.
German factory orders, adjusted for seasonal swings and inflation, dropped 2.7 percent from December, the Economy Ministry in Berlin said today. Economists forecast a gain of 0.6 percent, according to a Bloomberg News survey.
“Safe-haven demand for bunds remains in place even with yields close to their historic lows,” John Davies, a fixed-income strategist at WestLB AG in London, wrote today in an e-mailed statement.
Germany sold 0.75 percent notes due in February 2017 at an average yield of 0.79 percent, a record low for the securities. That compares with 0.91 percent at the previous auction on Feb. 8. Investors bid for 1.8 times the amount allotted, the same as the previous auction.
The 10-year German bund futures rose to a euro-era high of 140.52 before trading little changed at 140.26. The next level of so-called resistance is 140.87, according to Viola Stork and Ulrich Wortberg, analysts at Helaba Landesbank Hessen-Thueringen in Frankfurt. Resistance refers to an area where sell orders may be clustered.
German bonds returned 0.4 percent this year, after rising 9.7 percent in 2011, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Italian securities have gained 12 percent in 2012.