Government bonds rose across the euro area as tensions eased in Greece and auctions wound down in a week with near-record debt issuance for the year.
Belgian bonds led the advance, with 10-year yields falling the most in more than two years, and equivalent French yields dropped to a six-week low. Italian 10-year bond yields also slid, while similar-maturity Spanish securities extended their longest run of gains since March 2013. Gross sales totaled 36.3 billion euros ($39.4 billion) in the week, the second-highest in 2015, strategists at Barclays Plc said.
“The bulk of supply is behind us, the tone is likely to remain very supportive and the supply conditions will be very favorable for lower yields,” said Patrick Jacq, a senior fixed-income strategist at BNP Paribas SA in Paris.
Belgium’s 10-year bond yield fell six basis points, or 0.06 percentage point, to 1.11 percent, at 4:46 p.m. London time, extending this week’s decline to 22 basis points, the most since April 2013. The 0.8 percent security due June 2025 rose 0.59, or 5.90 euros per 1,000-euro face amount, to 97.10.
The French 10-year bond yield dropped six basis points to 1.08 percent and touched 1.07 percent, the lowest since June 3.
The average yield on euro-area sovereign securities declined to 0.92 percent, the lowest level since June 2, as investors sought new homes for cash from redemptions and after Greece reached an agreement with its creditors, Bank of America Merrill Lynch indexes show. It climbed to its 2015 high of 1.08 percent as recently as June 15 amid concern that Greece would be unable to reach a financing deal.
“We are relatively bullish on core markets,” Jacq said. “There could be further spread compression but in the very near term the movement has been substantial, so there could be some pause.”
Spain’s 10-year yield fell for a ninth day, declining five basis points to 1.93 percent, while Italy’s yield fell seven basis points to 1.92 percent. It declined 21 basis points in the week, the most since Feb. 27.
The additional yield investors demand to hold the Italian bonds over equivalent-maturity benchmark German bunds tumbled for a second week. The spread narrowed 10 basis points since July 10 to 113 basis points and touched a 10-week low of 108 basis points.