Bunds Rise After Orphanides Comments; Spain Bonds Drop as Auction Scrapped

German bonds rose, pushing the yield on the two-year security four basis points lower to 1.12 percent as of 9:42 a.m. in London.

The yield on the 10-year bund declined two basis points to 3.02 percent.

European Central Bank council member Athanasios Orphanides said the market may have ``overreacted'' to ECB statements last week that were not ``overly hawkish.'' He also said the bank may be able to stop buying government bonds if Europe’s rescue fund is empowered to purchase debt.

Spanish bonds dropped, pushing the 10-year yield up five basis points to 5.42 percent, after the nation cancelled two Jan. 20 bond sales and replaced them with a syndicated offering.

To contact the editor responsible for this story: Keith Campbell at k.campbell@bloomberg.net