BLBG:Pound Advances to Two-Week High Against Euro Amid Spain Concern
The pound rose to a two-week high against the euro as investors sought the U.K. currency as a haven amid speculation Spain will refrain from requesting the aid needed to help fix its debt crisis.
Sterling strengthened against the dollar after an industry report showed U.K. mortgage approvals climbed in August. Spanish borrowing costs increased as the nation sold bills today and Deputy Prime Minister Soraya Saenz de Santamaria said the government needs to know how much the European Central Bank intends to spend on bond purchases before it can take a decision on seeking outside help. Gilts gained for a second day.
“Markets are nervous that Spain won’t request a bailout,” said Steven Barrow, head of Group of 10 research at Standard Bank Plc in London. “Most of the indicators I look at for the short-term direction of sterling, except for against the dollar, look reasonably OK.”
The pound appreciated 0.2 percent to 79.56 pence per euro at 11:31 a.m. London time after rising to 79.37 pence, the strongest level since Sept. 7. The U.K. currency gained less than 0.1 percent to $1.6226.
Sterling may climb to 75 pence per euro in 12 months and reach 70 pence in around two years, Barrow said.
Spain sold three-month bills at a yield of 1.203 percent, up from 0.946 percent at the previous auction on Aug. 28. The nation sold six-month securities at 2.213 percent, compared with 2.026 percent. Demand for the three-month bills dropped to 3.29 times the amount allotted, from 3.35 times in August.
‘Many Fronts’
“There are many fronts we have to tackle,” Saenz told radio station Cadena Ser today. “We need to know to what extent the ECB will intervene in the secondary market. To take decisions you need to have all the elements on the table.”
U.K. mortgage approvals increased to 30,533 last month from 28,750 in July, the British Bankers Association said.
The pound has strengthened 2 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro tumbled 3.2 percent and the dollar weakened 2.7 percent.
The 10-year gilt yield fell three basis points, or 0.03 percentage point, to 1.78 percent after dropping to 1.77 percent, the lowest level since Sept. 12. The 1.75 percent bond maturing in September 2022 gained 0.3, or 3 pounds per 1,000- pound face amount, to 99.72.
Gilts returned 2.5 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 2.6 percent and U.S. Treasuries rose 1.9 percent.
The U.K. debt agency is selling inflation-linked bonds maturing in March 2052 through banks including Morgan Stanley, Royal Bank of Scotland Group Plc, Societe Generale SA and UBS AG, according to a person familiar with the offering.
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
