Spanish bonds declined, pushing the 10-year yield to the highest level in a month, as European finance chiefs meet to discuss further aid for Greece amid concern the region’s debt crisis remains unresolved.
Spain’s benchmark securities fell for the third time in four days after Foreign Minister Jose Manuel Garcia-Margallo said any referendum on independence called by Catalonia would amount to a coup d’etat. Greek bonds rose as Prime Minister Antonis Samaras won the support of enough lawmakers to secure approval for next year’s budget. Austrian and Belgian 10-year yields dropped to records as investors sought safer assets. Finance ministers were scheduled to meet at 5 p.m. in Brussels.
“The problems for Spain are still very much there, the banking system is in deep trouble, as are its regions,” said Marc Ostwald, a rates strategist at Monument Securities Ltd. in London. “The efforts to play down expectations that anything might come from the finance minister meetings have been extraordinary and this is unsettling the market.”
Spain’s 10-year yield increased seven basis points, or 0.07 percentage point, to 5.89 percent as of 4:51 p.m. London time, after rising to 5.90 percent, the most since Oct. 11. The 5.85 percent security due in January 2022 fell 0.46, or 4.60 euros per 1,000-euro ($1,271) face amount, to 99.695. The nation’s two-year yield climbed 10 basis points to 3.23 percent.
Garcia-Margallo said Spain’s Constitutional Court would annul any referendum called by Catalan President Artur Mas’s government in Barcelona. That means any vote would be “clearly illegal, a coup d’etat in legal terms,” he said in an interview with Cope radio today.
The Greek parliament voted late yesterday to pass the 2013 budget after lawmakers approved an austerity bill on Nov. 8 containing economic reforms and 13.5 billion euros of spending cuts demanded by Greece’s creditors.
The finance ministers will assess whether the latest round of cuts that Samaras squeezed through parliament with 153 of 300 votes, are sufficient to warrant further aid.
The European Commission, the International Monetary Fund and the European Central Bank, which oversee Greece’s bailouts, said the country may require an additional 15 billion euros through 2014 and 17.6 billion euros in the two following years, according to a draft of the so-called troika’s report obtained by Bloomberg.
The yield on Greece’s 2 percent bond due February 2023 dropped 11 basis points to 17.88 percent, leaving the price at 31.035 percent of face value.
This week sees the most debt sold by euro-region nations until the end of 2012, Royal Bank of Canada analysts led by London-based senior economist James Ashley wrote today in an e-mailed note.
Greece is due to sell as much as 3.125 billion euros of 28-and 91-day bills tomorrow. It last sold 91-day securities on Oct. 16 at an average yield of 4.24 percent.
The Netherlands is scheduled to sell as much as three billion euros of bonds maturing in 2022 tomorrow, before Italy auctions a total of five billion euros of debt on Nov. 14. Germany will sell five billion euros of two-year notes the same day, while France auctions as much as nine billion euros of bonds and inflation-linked securities on Nov. 15.
Belgium’s 10-year rate declined three basis points to 2.279 percent, the lowest since Bloomberg started collecting the data in 1993. The yield on similar-maturity Austrian securities slipped to 1.788 percent, also the least since 1993.
“The environment remains very supportive for core markets,” said Patrick Jacq, a senior fixed-income strategist at BNP Paribas SA in Paris. “There is room for lower bund yields in coming months from an economic and risk perspective, although the pace of the move may slow.”
Germany’s 10-year bund yield was at 1.34 percent. It declined to 1.31 percent on Nov. 9, the lowest since Aug. 31.
Two-year notes yielded minus 0.036 percent. The rate dropped to minus 0.055 percent on Nov. 7, the least since Aug. 13. A negative yield means investors who hold the security until it matures will receive less than they paid to buy it.
Volatility on Greek bonds was the highest in euro-region markets today, followed by those of Ireland, according to measures of 10-year or equivalent-maturity debt, the spread between two- and 10-year securities, and credit default swaps.
Ireland’s National Treasury Management Agency is planning a long-term debt issue, the Irish Sunday Business Post reported yesterday, citing unidentified people in the market.
The nation’s five-year note yield was little changed at 3.45 percent.
Spanish securities gained 2.4 percent this year through Nov. 9, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds returned 4 percent.