Italian Bonds Fall With Spain’s as Data Miss Estimates

Italian government bonds fell, completing their first weekly loss since July 11, as a selloff in stocks and factory data that trailed economists’ estimates damped demand for higher-yielding assets.

Spanish securities also tumbled as the global retreat in equities deepened after Argentina missed a deadline to pay $539 million in interest to bondholders. Portuguese bonds dropped amid a six-day decline in Banco Espirito Santo SA shares as financial turmoil at the lender deepened. Manufacturing expanded last month at a slower pace in Italy, Spain and in the euro bloc, according to purchasing managers’ indexes.

“The market is generally in a risk-off mode and that’s affecting peripheral bonds like Spain’s and Italy’s,” said Nick Stamenkovic, a fixed-income strategist at RIA Capital Markets Ltd. in Edinburgh. He listed “Argentina’s default, data that missed estimates, concern over earnings, geopolitical outlook and Portugal’s banking sector” as reasons for the drop.

Italian 10-year yields climbed six basis points, or 0.06 percentage point, to 2.76 percent as of 5 p.m. London time. The 3.75 percent bond due in September 2024 dropped 0.58, or 5.80 euros per 1,000-euro ($1,343) face amount, to 108.835. The rate was five basis points higher than last week’s close.

Spain’s 10-year yield rose six basis points to 2.56 percent, compared with 2.54 percent on July 25. The rate dropped to 2.451 percent on July 30, the least since Bloomberg began compiling the data in 1993. Similar-maturity Portuguese yields increased nine basis points today to 3.70 percent.

The Stoxx Europe 600 Index of shares slid 1.2 percent, extending yesterday’s 1.3 percent decline.

Slowing Activity

Italy’s manufacturing PMI fell to 51.9 in July, the lowest since November, from 52.6 the previous month. While the result signaled a 13th month of expansion, it was below the median forecast of 52.5 in a Bloomberg News survey of economists. For the 18-nation region, the Markit Economics gauge was at 51.8, compared with a prior estimate of 51.9.

European bonds stayed lower even after a U.S. report showed the economy added fewer jobs in July than forecast by economists. The 209,000 advance followed a 298,000 gain in June that was stronger than previously reported, figures from the Labor Department showed today in Washington.

German 10-year yields fell two basis points to 1.13 percent after rising as much as four basis points. The rate touched a record-low 1.109 percent on July 29.

Belgian bonds led gains among euro-region bonds in the past three months, handing investors a 4 percent return through yesterday, according to Bloomberg World Bond Indexes. Spain’s earned 3.1 percent and Italy’s gained 3.2 percent.

(Corrects spelling of company name in second paragraph.)
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