Irish Bonds Gain for Ninth Week as 10-Year Yield Drops to Record

Ireland’s 10-year securities rose for a ninth week as the nation auctioned its first bonds since 2010, marking its successful emergence from bailout measures and adding to signs the euro area’s financial woes are abating.

Ireland’s 10-year yield dropped to a record low on the day of the bond sale. The average yield to maturity on securities from Greece, Ireland, Italy, Portugal and Spain fell to the lowest in euro-area history this week, according to Bank of America Merrill Lynch indexes. German 10-year yields slid to the lowest level in seven months yesterday as investors sought the safest assets before a referendum in Crimea tomorrow as the local government attempts to secede from Ukraine.

“Ireland’s progress since their bailout remains very promising and the market is rewarding them by being very forward-looking in their pricing,” said Peter Chatwell, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. “This is good for Europe, in proving that the bailout method can work as a way of rebalancing an economy within the monetary union.”

Ireland’s 10-year yield fell five basis points, or 0.05 percentage point, this week to 3.03 percent at 5 p.m. London time yesterday after dropping to a record-low 2.985 percent on March 13. The rate climbed to a euro-era high of 14.22 percent in July 2011 amid concern the nation would struggle to pay its debt. The 3.4 percent bond due March 2024 rose 0.38, or 3.80 euros per 1,000-euro ($1,391) face amount, to 103.12.

Irish Sale

After a three-year hiatus from bond auctions while it was under the protection of an international bailout, Ireland sold 1 billion euros of the March 2024 securities to yield 2.967 percent. That’s the lowest on record for a 10-year auction. Investors bid for 2.9 times the amount of debt sold.

The average yield on Greek, Irish, Italian, Portuguese and Spanish bonds fell to 2.438 percent on March 10, the Bank of America index shows, as investors returned to markets they shunned during the euro-area’s debt crisis. That’s down from more than 9.5 percent in November 2011, when the region was rocked by concern nations would struggle to service their debt, risking a breakup of the currency bloc.

Italy’s 10-year yield dropped two basis points this week to 3.41 percent and Spain’s declined two basis points to 3.34 percent.

The additional yield investors demand to hold Italian 10-year bonds over similar-maturity German bunds slid to 173 basis points on March 11, the least since June 2011. The equivalent Spanish spread shrank to 165 basis points on March 10, the tightest since October 2010.

German Yields

German 10-year bund yields dropped to as low as 1.50 percent yesterday, the least since July 19, as Russia warned Ukraine’s government has lost control of the country, fueling concern the Kremlin may extend a military intervention.

The U.S. and the European Union are threatening sanctions against Russia if it doesn’t back down from annexing the Black Sea province. Estonian Defense Minister Urmas Reinsalu said Russia is preparing to “invade eastern Ukraine.”

Germany is due to auction 4 billion euros of benchmark 10-year bunds on March 19. The Frankfurt-based Finance Agency last sold the securities on Feb. 19 at an average yield of 1.64 percent, the lowest at a 10-year debt auction since July.

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