Spain's Bonds Fall With Italy's on $13 Billion of Euro Supply

Updated on
  • Austria, Netherlands, Spain among nations that sold debt
  • Germany's securities erase earlier drop after auction

Bonds of Europe’s lower-rated nations fell as investors took on 12 billion euros ($13 billion) of new supply.

Spanish debt saw some of the biggest declines as the nation sold 9 billion euros of 10-year bonds via banks, after receiving orders for more than 29 billion euros. German and French bonds were little changed, erasing an earlier drop, after the sales were completed later in the afternoon.

European government bonds came “under pressure, which we would put down to a combination of factors, in particular supply,” said Orlando Green, a fixed-income strategist at Credit Agricole SA’s corporate and investment-banking unit in London. Also, “some investors selling flows have been seen, and it’s also been a quieter Chinese session, which has allowed some respite from the risk aversion.”

The Netherlands issued 1.18 billion euros of securities due 2033, while Austria auctioned 10- and 20-year bonds and Germany allotted 762 million euros of index-linked debt due in 2026. In addition, Italy, Germany and Spain are due to auction as much as 16.8 billion euros of securities on Wednesday and Thursday.

The yield on Spain’s existing 10-year bond rose three basis points, or 0.03 percentage point, to 1.83 percent as of 4:25 p.m. London time, after climbing nine basis points on Monday. The price of the 2.15 percent security due in October 2025 fell 0.26, or 2.60 euros per 1,000-euro face amount, to 102.85.

German 10-year bund yields were little changed at 0.53 percent, after climbing as much as four basis points earlier. Italian yields rose two basis points to 1.61 percent, while Portugal’s added three basis points to 2.68 percent.

China Shock

Euro-area government bonds are paring gains from last week when turmoil in Chinese stocks shook global currency, equity and commodity markets. Since then, the world’s No. 2 economy is said to have intervened in its stock market and has stepped up its defense of the yuan. Waning appetite for havens is weighing on fixed income, though low levels of inflation in the euro zone, and a central bank tackling this threat by buying assets, is seen supporting bonds in the longer term.

European Central Bank Governing Council member Francois Villeroy De Galhau said Tuesday that inflation remains too low and policy makers have the tools to act further if needed.