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Spanish Bonds Rise as Recovery Prompts Search for Higher Yields

Spain’s bonds advanced this week, with 10-year yields falling the most since September 2012, as signs the euro-area economy is gaining momentum boosted demand for securities with higher returns than those on German debt.

The extra yield investors demand to hold Spanish 10-year debt over similar-maturity German bunds dropped below 2 percentage points yesterday for the first time since May 2011 as unemployment in Spain fell. Separate data this week showed manufacturing in Italy and Spain expanded more last month than economists forecast. The region’s bonds have also been supported by European Central Bank President Mario Draghi’s pledge to keep interest rates low to support the economy.