BLBG:Italian Bonds Advance as Coeure Says ECB Will Preserve Euro
Italian bonds climbed, snapping a decline from yesterday, as European Central Bank executive board member Benoit Coeure said the institution will do everything it can within the terms of its mandate to preserve the euro.
Benchmark German 10-year bonds fell, pushing the yield up from the lowest level in almost 12 weeks as Coeure’s comments on Europe 1 radio echoed ECB President Mario Draghi’s pledge in July to do “whatever it takes” to defend the single currency. The Netherlands is due to sell as much as 2 billion euros ($2.6 billion) of five-year notes today, while Italy auctions 8.5 billion euros of six-month bills and France is selling bonds maturing in 2045 through banks.
“We’re correcting some of the selloff from yesterday,” said Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London, referring to Italian bonds. “It shows the market still believes in Draghi’s promise. There’s still a grab for yield.”
Italian 10-year yields fell five basis points, or 0.05 percentage point, to 4.56 percent as of 8:59 a.m. London time, after climbing 10 basis points yesterday. The 5.5 percent security due November 2022 rose 0.41, or 4.10 euros per 1,000- euro face amount, to 107.64. The rate on similar-maturity Spanish bonds dropped three basis points to 4.93 percent.
German 10-year bund yields climbed three basis points to 1.36 percent, after dropping to 1.33 percent yesterday, the lowest since Jan. 2.
Italian and Spanish bonds slid yesterday as a bailout agreement for Cyprus failed to convince investors that fallout from the nation’s banking crisis would be contained.
‘Many Hurdles’
“The bond markets are moving one way and then another this week, with exaggerated moves, and now people are taking stock of the situation,” said Orlando Green, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. “On one hand the bailout seems to have been resolved but that doesn’t mean things are better going forward. There are still many hurdles that need to be cleared.”
The Netherlands last sold five-year notes on Feb. 12 at an average yield of 0.884 percent. Italy auctioned six-month bills on Feb. 26 at 1.237 percent.
German bunds handed investors a return of 0.7 percent this month through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Italian bonds earned 0.9 percent, while Spanish securities gained 0.6 percent.
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net.
