Portugal’s notes led gains in the euro area’s so-called periphery as the nation’s first sale of 10-year bonds since its bailout in 2011 attracted demand for more than three times the amount being raised.
The nation’s two-year yields dropped to the lowest since July 2010. Investors submitted bids for 10.2 billion euros ($13.4 billion) of the debt maturing in February 2024, compared with the 3 billion euros being sold, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it. German bunds fell for a third day as factory orders unexpectedly increased in March, damping demand for the region’s safest assets.
“The demand Portugal got from investors was strong, which reinforces the positive sentiment,” said Alessandro Giansanti, a senior rates strategist at ING Groep NV in Amsterdam. “In a low-yield environment, investment is attracted to securities that offer yield.”
Portugal’s two-year yield fell 14 basis points, or 0.14 percentage point, to 2.42 percent at 5 p.m. London time, after reaching 2.40 percent, the lowest since July 28, 2010. The 3.6 percent bond due in October 2014 gained 0.195, or 1.95 euros per 1,000-euro face amount, to 101.63.
The nation’s five-year yield declined eight basis points to 4.14 percent. The 10-year bond yielded 5.52 percent after falling to 5.435 percent, the lowest since Aug. 31, 2010.
Portugal is selling 10-year bonds for the first time in more than two years as it seeks to regain full access to debt markets. The nation stopped selling bonds until this year after requesting a 78 billion-euro bailout from the European Union and International Monetary Fund in April 2011.
“The 10-year maturity is a very important maturity because it completes the yield curve and so completes our process of returning to bond markets and normalizes our access to markets,” Portuguese Finance Minister Vitor Gaspar told reporters in Brussels. “At this moment we have already been able to totally finance our needs for this year and are starting the pre-financing for 2014.”
Portugal’s sale will support the bond markets of other highly indebted European nations, according to Peter Chatwell, a senior fixed-income strategist at Credit Agricole Corporate & Investment Bank in London.
“It marks further progress in exiting the bailout programmes of the worst of the euro sovereign debt crisis,” Chatwell wrote in an e-mailed note today. “We expect investor appetite to be strong, with the deal likely to be a beneficiary of the prevailing ‘yield grab’ mentality.”
Italian 10-year yields dropped five basis points to 3.87 percent.
German factory orders, adjusted for seasonal swings and inflation, increased 2.2 percent from February, the Economy Ministry in Berlin said. Economists forecast a 0.5 percent drop, according to the median of 39 estimates in a Bloomberg survey.
Ten-year bund yields climbed six basis points to 1.30 percent after reaching 1.31 percent, the most since April 11.
Germany allotted 740 million euros of inflation-linked bonds due in April 2023 at a so-called real yield of minus 0.4 percent, the lowest on record according to data compiled by Bloomberg.
Austria’s 10-year bond yields rose three basis points to 1.67 percent after the nation sold 660 million euros of debt maturing in 2023 at a record-low auction yield of 1.621 percent.
Portuguese bonds returned 5.8 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Austrian securities gained 1.7 percent, and Germany’s rose 0.8 percent.