Spanish 10-Year Bonds Rise a Second Day; Greek Debt Advances

Spain’s 10-year government bonds rose for a second day as the prospect of a bailout prevented borrowing costs from rising even as the economy worsened.

The securities pared their fourth weekly decline. Prime Minister Mariano Rajoy is yet to request aid, which is needed before the European Central Bank would step in to buy the nation’s debt. Data yesterday showed Spain’s economic recession dragged into a fifth quarter. Greek 10-year bonds advanced for a sixth day as Italian Finance Minister Vittorio Grilli said he is confident that euro-region finance chiefs will reach an agreement on aiding Greece when they meet next week.

“The possibility of bond buying may be putting a ceiling on yields,” said Elisabeth Afseth, an analyst at Investec Bank Plc in London. “It seemed to me as if there were some buyers as the Spanish 10-year yield got close to 6 percent.”

The rate on Spain’s 10-year bonds fell three basis points, or 0.03 percentage point, to 5.87 percent at 4:15 p.m. London time. The yield climbed to 5.96 percent on Nov. 13, the highest level since Oct. 1. The 5.85 percent bond maturing January 2022 rose 0.185, or 1.85 euros per 1,000-euro ($1,271) face amount, to 99.805.

Still, the rate has risen five basis points since Nov. 9, and was set for a fourth weekly gain, the longest run of increases since the period ending June 1.

Spain plans to sell bonds due between 2015 and 2021 on Nov. 22, the nation’s Treasury said today.

Obstacle Removed

European Union Economic and Monetary Affairs Commissioner Olli Rehn this week removed an obstacle blocking Rajoy’s path to a sovereign bailout, endorsing his deficit-reduction efforts as the recession deepened. The spending cuts and tax increases Rajoy has introduced for this year and next are enough to satisfy the EU, Rehn said on Nov. 14.

Greece was this week granted an additional two years to reach budget-deficit goals in its bailout program. European finance ministers will be discussing ways of plugging the funding gap resulting from that extension at a meeting in Brussels on Nov. 20.

“We know that there are several options for helping Greece get through this very important challenge,” Grilli said in an interview with Francine Lacqua on Bloomberg Television’s “On the Move” in London. “I am clearly optimistic that we can come to a decision.”

Greek Yield

The yield on Greece’s 2 percent security due in February 2023 fell for a sixth day, dropping 13 basis points to 17.42 percent, and leaving the price at 32.1 percent of face value.

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

German 10-year bund yields were little changed at 1.33 percent. They dropped to 1.31 percent on Nov. 13, matching the lowest since Aug. 31. Two-year notes yielded minus 0.034 percent. Negative yields mean investors who hold the securities to maturity will receive less than they paid to buy them.

German bonds returned 4 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish securities gained 2.1 percent, while Italian securities earned 18 percent.

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