Italian Bonds Advance After Auctions as Equity Markets Falter

  • Italy's Treasury sells 7 billion euros of government debt
  • German ZEW investor confidence falls to weakest in one year

Italian government bonds rose alongside those of Spain for a second day, as faltering equity markets and weaker trade data from China boosted demand for fixed-income assets.

Italy’s 10-year securities were also supported as the nation matched its maximum target of 7 billion euros ($8 billion) in auctions of debt due between 2018 and 2032 on Tuesday. Chinese import data that missed economists’ forecasts helped drag European stocks lower and fuel investor concern that a slowdown in the world’s second-largest economy will weigh on other nations.

“Equity markets are slightly weaker today so that is probably just giving support to fixed income,” said Owen Callan, a Dublin-based fixed-income strategist at Cantor Fitzgerald LP. “We do have some issuance for the next few days. European fixed income has been pretty solid around auctions over the last few weeks so I wouldn’t expect them to come out badly,” he said. Speculation of more stimulus from the European Central Bank should keep demand at these auctions “pretty strong,” he said.

Italy’s 10-year bond yield fell two basis points, or 0.02 percentage point, to 1.66 percent as of 1:52 p.m. London time. The 1.5 percent security due in June 2025 rose 0.15, or 1.50 euros per 1,000-euro face amount, to 98.605. The yield on similar-maturity Spanish bonds dropped one basis point to 1.80 percent.

The Stoxx Europe 600 Index of shares declined 1.4 percent.

Italian Auctions

The Rome-based Treasury allotted 3.5 billion euros of notes maturing in October 2018 at an average yield of 0.25 percent. Italy also sold securities due in September 2022 and March 2032.

German 10-year bonds, the euro area’s benchmark sovereign securities, rose earlier as a gauge of investor confidence fell to its weakest level in a year in October.

The ZEW Center for European Economic Research’s gauge of investor confidence fell to 1.9 from 12.1 in September, below the median forecast of 6.5 in a Bloomberg survey of economists. German 10-year bund yields were little changed at 0.57 percent, having fallen as much as two basis points earlier.

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