Spanish Bonds Advance After German Confidence Improves

Spain’s bonds advanced, with 10-year yield falling toward the lowest level in two weeks, as an improvement in German investor confidence boosted demand for higher-yielding sovereign debt.

Spanish two-year notes rose for the first time in four days as borrowing costs fell when the nation sold 4 billion euros ($5.3 billion) of three- and nine-month bills. German bunds were little changed before the country auctions 10-year securities tomorrow. Belgium’s debt agency plans to sell five-year notes through banks this week. Economists said a report tomorrow will show consumer confidence in the euro-area improved this month.

“The data flow is improving and that makes the market raise its expectations for other sentiment indicators,” said Michael Leister, a London-based fixed-income strategist at Commerzbank AG. “Spanish and Italian bonds are reversing their earlier losses.”

Spain’s 10-year yield fell four basis points, or 0.04 percentage point, to 5.19 percent at 4:03 p.m. London time after dropping to 5.16 percent on Feb. 14, the lowest since Feb. 1. The 5.4 percent bond due in January 2023 rose 0.315, or 3.15 euros per 1,000-euro face amount, to 101.58.

Italy’s 10-year yield dropped one basis point to 4.40 percent after earlier rising as much as five basis points.

Germany’s central bank said yesterday it expects the country to return to growth this quarter as confidence improves and the global economy gains strength.

The ZEW Center for European Economic Research said its index of investor and analyst expectations climbed to 48.2 from 31.5 in January. That’s the highest since April 2010. Economists forecast a gain to 35, according to the median of 38 estimates in a Bloomberg News survey.

Spanish Auction

Spain sold 3.1 billion euros of three-month bills at an average yield of 0.421 percent, down from 0.441 percent at a previous auction on Jan. 22. The nine-month securities, which were sold for the first time, yielded 1.144 percent. Spain will auction debt due in 2015, 2019 and 2023 on Feb. 21.

Germany’s 10-year bund yielded 1.62 percent after falling to 1.58 percent on Feb. 8, the lowest level since Jan. 25. The nation last sold 10-year debt on Jan. 16 at an average yield of 1.56 percent.

French Growth

French 10-year bonds were little changed after Foreign Minister Laurent Fabius said growth forecasts for 2013 would be cut to about 0.2 percent to 0.3 percent.

“Things are not going famously well at the European level, so we will have to lower it,” Fabius said in an interview on RTL Radio, referring to the government’s 2013 growth forecast which stands at 0.8 percent.

France’s 10-year yield was at 2.26 percent.

Belgium’s debt agency said yesterday it hired Credit Agricole SA, HSBC Holdings Plc, ING Groep NV and KBC Groep NV to sell new benchmark notes due in June 2018.

Belgium’s five-year yield was little changed at 1.19 percent. The nation last sold five-year securities at an average yield of 0.935 percent in November.

Volatility on Spanish bonds was the highest in euro-area markets, followed by those of Italy and Belgium, according to measures of 10-year debt, the spread between two-year and 10-year securities and credit-default swaps.

German bunds handed investors a loss of 1.5 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish securities returned 2.1 percent and Italian bonds gained 1.2 percent.

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