Spanish 10-Year Yields Rise Above 6% Before This Week’s Sales

Spain’s bonds fell, with 10-year yields climbing above 6 percent, as the nation’s debt office said it plans to sell as much as 4.5 billion euros ($5.92 billion) of three- and 10-year securities this week.

Spanish two-year notes dropped for a third day after European Union finance ministers meeting in Cyprus last week failed to agree on a timetable for a more unified banking system. Spain’s securities also declined on concern the government will hold back from an aid request that may include debt purchases by the European Central Bank. German bunds gained as investors sought the region’s safest securities.

“There’s obviously a focus on the supply,” said Richard McGuire, a senior fixed-income strategist at Rabobank International in London. “There’s some concession building ahead of that issuance, but then the concession building is being exacerbated by this uncertainty as to if and when Spain might request a bailout.”

Spain’s 10-year yield climbed 20 basis points, or 0.2 percentage point, to 5.99 percent at 4:07 p.m. in London after rising to 6.01 percent, the highest since Sept. 7. The 5.85 percent bond due in January 2012 dropped 1.435, or 14.35 euros per 1,000-euro face amount, to 98.99.

The country’s two-year yields rose 21 basis points to 3.35 percent after reaching 3.36 percent, the most since Sept. 4.

Spain is selling notes due in October 2015 and bonds maturing in January 2022 on Sept. 20. The nation sold three-year debt on Sept. 6, when demand declined as it auctioned 3.5 billion euros of the securities.

Spain Request

The sale may add pressure on Spain to make an aid request, Deutsche Bank strategists Mohit Kumar and Abhishek Singhania in London, wrote today in a weekly note to clients.

EU officials meeting in Cyprus on Sept. 14 disagreed over a European Commission plan to establish joint banking supervision from the beginning of next year. German Finance Minister Wolfgang Schaeuble, backed by colleagues from Sweden, the Netherlands and Poland, urged the meeting to agree on a more cautious approach when assigning new duties to the region’s central bank.

“The finance ministers’ meeting has come and gone and despite the indication of willingness by the ECB to buy bonds, we are still no closer to what many in the market consider the ultimate endgame,” said Brian Barry, an analyst at Investec Bank Plc in London. “Until we reach a position where their resolve to contain yields can be tested, yields could continue to drift higher.”

Italian Bonds

Italian bonds also declined, with the 10-year yield rising eight basis points to 5.09 percent, and two-year rates increasing six basis points to 2.32 percent.

Spanish union leaders demanded Prime Minister Mariano Rajoy test support for his budget cuts in a referendum as an estimated 65,000 protesters took to the streets of Madrid two days ago, blocking off the center of the Spanish capital.

Rajoy travels to Rome for talks with Italian Prime Minister Mario Monti on Sept. 21. The following day, German Chancellor Angela Merkel will hold talks with French President Francois Hollande at a commemoration in Ludwigsburg, Germany.

Germany’s 10-year bund yield dropped two basis points to 1.68 percent after rising to 1.73 percent, the highest level since April 26.

The Netherlands sold 99- and 190-day bills at negative yields today, the Dutch debt agency said. The country’s 10-year yields dropped two basis points to 1.93 percent.

Volatility on Spanish bonds was the highest in euro-area markets today, followed by Portugal, according to measures of 10-year or equivalent-maturity debt, the spread between two-year and 10-year securities and credit-default swaps.

Spain’s bonds returned 0.9 percent this year through Sept. 14, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds advanced 1.7 percent and Italy’s securities rose 15 percent.

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