Spanish Bonds Lead Euro-Area Drop as Qatar Oil Talks Fall Short

  • German securities pare drop even as investor confidence slumps
  • Spain's yield spread with Germany widens from lowest in a week

Spain’s bonds fell for the first time in three days along with higher-risk assets worldwide after the Qatar oil-production talks failed to reassure investors that the global petroleum surplus will be diminished.

The extra yield, or spread, that investors get for holding the nation’s 10-year debt instead of benchmark German bonds with a similar due date, widened from the lowest level in a week. European stocks slid and oil erased gains after Qatar Energy Minister Mohammad bin Saleh al-Sada said a pledge by Saudi Arabia and Russia to freeze output at January levels depends on other producers following suit.

German 10-year bonds declined even as a report showed investor confidence in Europe’s largest economy slid to the lowest since October 2014.

Germany’s sovereign bonds posted the highest returns in the euro-area in the past month, according to the Bloomberg World Bond Indexes, as turmoil in emerging markets and a slide in commodity prices prompted a search for safety. Italy’s were among just three in the region to lose money, as concern about the health of region’s banks diluted the impact of wagers that the European Central Bank would expand its quantitative-easing program, which tends to boost prices of the targeted securities.

“The overriding market sentiment still is a risk-off and safe-haven-driven environment despite the fact that there might be some stabilization of the oil price with this agreement,” said Marius Daheim, a senior rates strategist at SEB AB in Frankfurt. “There are still a multitude of risks, not only related to geopolitics, but also there’s still China and the question of what’s going on with the European banking sector.”

Yield Spread

Spain’s 10-year bond yield increased six basis points, or 0.06 percentage point, to 1.76 percent as of 4:30 p.m. London time, after falling eight basis points in the previous two days. The 2.15 percent security due October 2025 fell 0.53, or 5.30 euros per 1,000-euro ($1,115) face amount, to 103.465. The securities yielded 150 basis points more than Europe’s benchmark bunds, compared with as little as 140 basis points Monday.

Germany’s 10-year bund yields rose two basis points to 0.26 percent, after earlier increasing by as much as four basis points.

Before it's here, it's on the Bloomberg Terminal.