Spanish Bonds Rise on Sale Demand; Portuguese Debt Climbs
Spain’s government bonds rose after the nation was said to sell 7 billion euros ($9.3 billion) of a new 10-year benchmark bond through banks, underscoring demand for the nation’s assets.
Ten-year yields fell toward the lowest level in a week after Economy Minister Luis de Guindos said the sale had the biggest demand in Spain’s history. Rates on Portugal’s 10-year debt fell below 6 percent for the first time since 2010 after Finance Minister Vitor Gaspar said the nation is ready to carry out primary-market sales. German 10-year yields fell from near the highest in three months after data showed sales of U.S. existing homes unexpectedly dropped in December.
“It’s a very successful day for Spain,” said Owen Callan, an analyst at Danske Bank A/S (DANSKE) in Dublin. “To be able to issue about 7 billion euros in one go is very encouraging. This makes up about 6 percent of what they require for the whole year.”
Spain’s 10-year yield declined five basis points, or 0.05 percentage point, to 5.11 percent as of 4:49 p.m. London time. The 5.85 percent bond maturing in January 2022 rose 0.365, or 3.65 euros per 1,000-euro face amount, to 105.22.
The two-year yield fell three basis points to 2.57 percent after climbing to 2.63 percent, the highest since Jan. 2.
The Spanish sale may be priced around 375 basis points more than the mid-swap rate, a person familiar with the plan said earlier.
“There seems to be substantial demand out there for this new bond,” said Michael Leister, a fixed-income strategist at Commerzbank AG in London, referring to the Spanish sale. “It was a key hurdle, which we think Spain will pass quite successfully. From this point there is room for Spanish yields to fall again.”
The Treasury has hired banks including Barclays Plc, Goldman Sachs Group Inc. and Banco Santander SA to sell the new benchmark, a person familiar with the arrangements said yesterday. Investors sought 24 billion euros of the bond, de Guindos said.
“Never in the history of Spain’s Treasury has there been such a volume of demand, whether in an auction or a syndicated sale,” he told reporters in Brussels following a meeting with his European Union counterparts. “This is a clear indication of the Spanish economy’s credibility.”
The nation sold 2.8 billion euros of bills today, exceeding the 2.5 billion-euro maximum target.
Ten-year Portuguese bonds rose for a fourth day, pushing yields down 23 basis points to 5.86 percent after reaching 5.84 percent, the least since before the nation requested financial aid from the European Union on April 6, 2011.
“Portugal is now in a condition to take advantage of any opportunity that presents itself in bond markets to carry out primary market issuance,” Gaspar said in Brussels last night following a meeting of euro-area finance ministers. His comments were broadcast by television station SIC Noticias today.
Portugal has appointed banks to manage a syndicated sale of 4.35 percent bonds due October 2017 according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about.
Ireland and Portugal could draw on a European Central Bank bond-buying program to help them become the first countries in the three-year debt crisis to be weaned off official aid, Economic and Monetary Commissioner Olli Rehn told reporters in Brussels today.
Volatility on Portuguese bonds was the highest in euro-area markets today, followed by those of Belgium and the Netherlands, according to measures of 10-year or similar-maturity debt, the yield spread between two-year and 10-year securities, and credit-default swaps.
Germany allotted 810 million euros of 10-year inflation- linked bunds at a so-called real yield of minus 0.19 percent. The yield on 10-year bunds slid two basis points to 1.57 percent. It rose to 1.64 percent on Jan. 18, the highest since Oct. 18.
Dutch two-year note yields slipped three basis points to 0.25 percent after the Netherlands sold a total of 2.085 billion euros of bonds due 2014 and 2042.
Sales of U.S. existing homes fell 1 percent to a 4.94 million annual rate last month, figures from the National Association of Realtors showed today in Washington. The reading was still the second-highest since November 2009. The median forecast of 79 economists surveyed by Bloomberg called for sales to increase to a 5.1 million rate.
German bunds have handed investors a loss of 1.3 percent this month through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish bonds returned 1.3 percent, while Dutch securities fell 1.4 percent.