Ireland’s Notes Advance as Nation Sells Debt; Italian Bonds Rise

Irish five-year notes surged, with the yield dropping the most in almost seven weeks, as Prime Minister Enda Kenny said a sale of the nation’s government debt was a success.

Italian and Spanish bonds also advanced as Ireland received orders for about 7 billion euros ($9.17 billion) for its 5.5 percent notes compared with the 2.5 billion euros the government planned to sell, according to two people familiar with the matter. German bunds rose after a report showed the euro region’s unemployment rate climbed to a record in November. The nation’s securities have had their worst start of the year since at least 1990.

“Decent demand for Irish bonds bodes well for other peripheral debt,” said Mohit Kumar, head of European fixed-income strategy at Deutsche Bank AG in London. “This is a very positive development. Ireland has been taking a number of positive steps that allow it to access the market again.”

Ireland’s five-year note yield dropped 12 basis points, or 0.12 percentage point, to 3.21 percent at 4:30 p.m. London time. The rate fell as much as 13 basis points, the most since Nov. 21. The 5.5 percent security due in October 2017 rose 0.525, or 5.25 euros per 1,000-euro face amount, to 109.955.

The Dublin-based National Treasury Management Agency sold about 2.5 billion euros of the 2017 notes, according to the people familiar, who declined to be identified because they were not authorized to speak about it. The agency said the securities were allotted at a yield of 3.316 percent.

Irish Bailout

Ireland hired Barclays Plc, Danske Bank A/S, Davy, Royal Bank of Scotland Group Plc and Societe Generale SA to sell the securities. The country received a bailout in 2010 as the state and its banks were frozen out of capital markets. The Irish government returned to international bond markets in July with a sale of 4.2 billion euros of new debt.

“It is another sign of confidence of outside investors that are looking at Ireland and see that the country has made progress,” Kenny said today at a meeting of Bavarian lawmakers in the southern German town of Wildbad Kreuth.

Irish bonds returned 0.5 percent this month through yesterday, after gaining 29 percent last year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.

Italian 10-year bond yields declined six basis points to 4.29 percent and the yield on similar-maturity Spanish debt fell three basis points to 5.08 percent.

Economic Data

Demand for the safest securities was underpinned as a report showed German factory orders dropped 1.8 percent in November, after rising 3.9 percent in the previous month. Economists had forecast a 1.4 percent decline.

The jobless rate in the 17-nation currency bloc rose to a record 11.8 percent in November from 11.7 percent a month earlier. A separate report showed retail sales climbed 0.1 percent from October, when they dropped 1.2 percent.

“The recent economic data has been mixed and I’m not sure if I agree with an argument that the worst is over,” said Charles Berry, a government bond trader at Landesbank Baden-Wuerttemberg in Stuttgart, Germany. “Demand for top quality will still be there in this environment.”

Germany’s 10-year bund yield dropped three basis points to 1.49 percent after rising to 1.56 percent on Jan. 4, the highest level since Oct. 26.

Worst Start

German bunds have lost 1.3 percent in 2013, the worst start to a year since at least 1990, according to Bank of America Merrill Lynch’s German Government Index.

The Netherlands sold 3.2 billion euros of three-year notes with a zero coupon at an average yield of 0.318 percent. The country last sold three-year debt on Nov. 27, when it auctioned 0.75 percent securities maturing in April 2015 at an average yield of 0.129 percent.

The yield on the notes maturing in April 2015 was little changed at 0.17 percent after the sale.

Volatility on Portuguese bonds was the highest in euro-region markets today, followed by Dutch and Greek, according to measures of 10-year or equivalent-maturity debt, the spread between two- and 10-year securities, and credit default swaps.

Before it's here, it's on the Bloomberg Terminal.