Spain's Bonds Halt Drop as Nation Sells 2 Billion Euros of Debt

  • Bid-to-cover ratio on 10-year bonds highest since 2004
  • U.S. jobs data due Friday seen as main focus for markets

Spain’s government bonds halted a decline as the nation sold 2 billion euros ($2.3 billion) of conventional debt, including the smallest amount of 10-year securities auctioned on record.

The bid-to-cover ratio on the 10-year bonds was 4.33, the highest since records dating to 2004, as the Treasury sold the least amount of the securities in the same period. Debt due in 2030 and 2040 was also auctioned. Spain’s 10-year bonds fell on Wednesday, with the yield jumping the most in two weeks.

“It does seem as though the market has taken the issuance well,” said Orlando Green, a rates strategist at Credit Agricole SA’s corporate and investment-banking unit in London. “It wasn’t a huge amount in the 10-year bond but they did quite a bit in the longer dated ones. So they are certainly biased towards the longer issuance side.”

Trading in Europe was subdued Thursday as some nations observed a public holiday. The main investor focus this week is U.S. data that will show employers added at least 200,000 workers for a third month in April, according to a Bloomberg survey of economists before the Labor Department releases the data Friday.

Spain’s 10-year bond yield was little changed at 1.61 percent as of 4 p.m. in London. The price of the 1.95 percent security due in April 2026 was 103.135 percent of face value. The yield climbed five basis points Wednesday, the most since April 21. The yield on benchmark German 10-year bunds was little changed at 0.17 percent.

Yield Climbs

The average yield for the 489 million euros of 10-year current bonds Spain sold was 1.592 percent, up from a 1.496 percent yield at a previous auction on April 7. The Treasury sold a total of about 1.54 billion euros of the bonds maturing in 2030 and 2040.

“In the context of Europe and the uncertainty in local matters in Spain with regards to its political situation, there is still an appetite at these sort of levels for the periphery at the very long end,” Credit Agricole’s Green said.

A Treasury official said the amount sold in 10-year bonds reflected increased demand for longer-dated debt sold in the same auction Thursday.

Spain is heading for new elections for the second time in six months after missing a deadline to form a government in May.

U.S. Jobs

Traders will turn their attention to the U.S. economic data Friday for cues on how the Federal Reserve’s policy may be evolving.

Friday’s U.S. payrolls data “is going to be the major focus of the week,” said Lyn Graham-Taylor, a rates strategist at Rabobank International in London. He said the bank will be “keeping a closer eye on the average hourly earnings,” and if there were a “big beat, it might make the Fed a bit more confident about raising rates in June.”

The probability the Fed will follow its December rate increase with another by June has dropped to 10 percent from 75 percent at the start of the year, futures contracts indicate.

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