German bunds rose, pushing down yields toward the lowest in nine months, as data showing the U.S. economy grew less than forecast in the first quarter boosted demand for the safest assets.
Spanish 10-year yields extended the biggest weekly decline since September on speculation the European Central Bank will cut its key interest rate at next month’s policy meeting. Bunds also gained after a U.S. government report showed the world’s biggest economy expanded less than economists forecast in the first quarter, boosting demand for safer assets. Italy’s bonds advanced for a fourth week after the nation auctioned 8 billion euros ($10.4 billion) of six-month bills at a record-low yield.
“It’s helped by the ECB, it’s helped by the U.S. data, there’s no doubt about that,” said Marc Ostwald, a London-based rates strategist at Monument Securities Ltd.
German 10-year bund yields fell three basis points, or 0.03 percentage point, to 1.21 percent at the 5 p.m. market close in London. The rate slid to 1.19 percent on April 23, the lowest since July 24. The 1.5 percent securities due February 2023 rose 0.29, or 2.90 euros per 1,000-euro face amount, to 102.69.
Spain’s 10-year yield slid one basis point to 4.28 percent, extending this week’s decline to 34 basis points. Italian 10-year yields were little changed at 4.06 percent, having dropped 16 basis points since April 19.
U.S. gross domestic product rose at a 2.5 percent annual rate, lower than forecast, after a 0.4 percent fourth-quarter advance, Commerce Department figures showed today in Washington. The median estimate of 86 economists surveyed by Bloomberg called for a 3 percent gain.
The ECB will reduce its main refinancing rate by 25 basis points to 0.5 percent at its meeting on May 2, according to the median estimate of economists in a Bloomberg News survey.
The Italian Treasury sold six-month bills at an average yield of 0.503 percent, the Bank of Italy said. That’s down from a rate of 0.83 percent at a previous auction of similar-maturity debt on March 26.
“If the ECB don’t deliver anything there will be negative price action in the periphery,” said Michael Markovich, head of global interest-rate research at Credit Suisse Group AG in Zurich.
Spain’s bonds pared their advance after Prime Minister Mariano Rajoy said he would seek two more years to tackle Europe’s widest budget deficit.
Spanish securities gained 7.3 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds returned 0.9 percent, and Italian debt earned 3.6 percent.
The cabinet in Madrid today approved a plan to cut the shortfall of 10.6 percent of gross domestic product back to within the European Union limit of 3 percent by 2016 instead of 2014 as demanded by the European Commission, according to an e-mailed statement.
Volatility on Finnish bonds was the highest in euro-area markets today followed by those of Germany and Ireland, according to measures of 10-year debt, the yield spread between two- and 10-year securities, and credit-default swaps.
Norway’s sovereign-wealth fund, the world’s largest, reduced its holdings in Austrian, French and Japanese government bonds in the first quarter.
Norway increased its investments in government bonds from the U.S., the Netherlands and Germany in its $728 billion Government Pension Fund Global, the Oslo-based investor said today. Government securities made up 59.7 percent of the fund’s fixed-income investments at the end of the quarter and were the worst-performing fixed-income assets, returning 0.6 percent, it said.