Spanish Bonds Drop a 2nd Day With Greek Talks Set to Go to Wire

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Spanish government bonds declined for a second day after another round of Greece aid negotiations ended without a deal less than a week before the nation is due to make a payment to the International Monetary Fund.

Italian securities also fell as talks resumed in Brussels on Thursday. Still, there are few signs of panic among bond investors as Greece’s June 30 deadline approaches. German 10-year bonds pared an earlier gain on Thursday, while those from Italy and Spain headed for a weekly advance.

“Most people are sidelined and waiting to see if we get the deal everyone hopes for,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen. “Most investors do expect a deal but it’s probably going to be a last-minute one. Until then there will be ups and downs -- there’s still some time left to bite their nails.”

Spain’s 10-year bond yields increased five basis points, or 0.05 percentage point, to 2.16 percent as of 11:05 a.m. London time. The 1.6 percent security due in April 2025 fell 0.395, or 3.95 euros per 1,000-euro ($1,117) face amount, to 95.085.

The moves are in contrast to the start of the week, when speculation a deal was getting closer pushed Spanish bonds yields down the most this year and triggered a slump in benchmark German bunds.

The yield on Spanish 10-year bonds fell 16 basis points on Monday, the steepest decline since June 2014. Italian 10-year bond yields rose four basis points to 2.17 percent on Thursday, compared with 2.28 percent at the end of last week.

Greek Impasse

Greece’s Prime Minister Alexis Tsipras is holding nonstop emergency talks with creditors as he struggles to break a five-month impasse that has brought the country to the cusp of default.

The race for an accord is accelerating as the nation moves nearer to the June 30 expiry of its euro-area bailout without any agreement in place to ensure it can meet a payment of 1.5 billion euros to the IMF that falls due the same day.

German 10-year bund yields were little changed at 0.84 percent, after earlier falling as much as three basis points. The yield has dropped four basis points in the past three days, less than half the 13 basis-point jump on June 22.