Italian 10-year bonds fell, with yields rising the most in more than two months, on speculation the European Central Bank will prevent lenders using future loans it provides to buy sovereign debt.
Spanish 10-year securities dropped for a third week. German 10-year yields climbed by the most since August as a report yesterday showed U.S. employers added more workers in November than analysts forecast and the jobless rate dropped, boosting the case for the Federal Reserve to cut stimulus. The ECB wants to ensure any future offerings of long-term cash find their way into the economy, and not hoarded by banks, President Mario Draghi said after a policy meeting in Frankfurt.
“Bond yields rose this week across markets because there was no easing or hint of easing action from the ECB,” said Lyn Graham-Taylor, a fixed-income strategist at Rabobank International in London.
Italy’s 10-year yield rose 12 basis points, or 0.12 percentage point, this week to 4.18 percent at 5 p.m. London time yesterday. The 4.5 percent bond maturing in March 2024 fell 0.985 or 9.85 euros per 1,000 euro face amount, to 103.03. The five-day gain in yields was the most since the period through Sept. 27.
The ECB last held a Long Term Refinancing Operation in March 2012 and officials said much of the cash they loaned then for three years went into funding governments or supporting bank balance sheets. Officials decided not to follow last month’s surprise interest-rate cut with another reduction, leaving the refinancing rate at 0.25 percent at the Dec. 5 meeting.
Germany’s 10-year yield rose 15 basis points this week, the most since the period ended Aug. 16, to 1.84 basis points. It climbed to 1.89 percent yesterday, the highest since Oct. 17.
Investor confidence in the euro area improved this month and industrial production rebounded in December, according to Bloomberg surveys of economists before data next week.
The 203,000 increase in U.S. payrolls followed a revised 200,000 advance in October, Labor Department figures showed in Washington. Federal Reserve policy makers are considering how and when to reduce $85 billion in monthly asset-purchase stimulus measure.
Italy’s bonds earned 6.7 percent this year through Dec. 5, according to Bloomberg World Bond Indexes. Spain’s debt returned 11 percent and Germany’s lost 1.9 percent.