Spanish and Italian 10-year bonds rose for a second day, appreciating relative to German bunds, amid speculation that European Central Bank policy makers may take steps to calm Europe’s debt crisis at a meeting today. The ECB “probably will be forced” to step up programs to fight the crisis, said Juergen Michels, chief euro-region economist at Citigroup Inc. German bunds fell, sending the yield to the highest since May 18, as stocks advanced, damping demand for the safest fixed-income assets. Spain drew stronger demand at a sale of three-year bonds today and France sold 5.395 billion euros of bonds maturing in 2017, 2018 and 2025. “There is some speculation that the ECB may announce additional measures to stem the pressures in the bond market,” said Elwin de Groot, a senior market economist at Rabobank Groep in Utrecht, Netherlands. “That’s driving the market.” The Spanish 10-year bond yield fell 10 basis points to 5.24 percent as of 10:15 a.m. in London. The 4.85 percent security maturing in October 2020 rose 0.73, or 7.30 euros per 1,000-euro ($1,320) face amount, to 96.86. The extra yield investors demand to hold the debt instead of similar-maturity German bonds narrowed 13 basis points to 236 basis points. The bund yield rose four basis points to 2.83 percent, after reaching the highest since May 18. Italian 10-year yields fell five basis points to 4.48 percent. The Stoxx Europe 600 Index of shares rose 0.7 percent. Spanish Sale Spanish three-year yields plunged 16 basis points to 3.90 percent after the nation drew stronger demand for three-year notes than at a previous auction in October. Spain raised 2.5 billion euros at today’s sale at an average yield of 3.717 percent, from 2.527 percent in October. Investors bid for 2.27 times the volume sold, from 2.16 in October. “The decent amount executed at a very confident price premium paints a picture of good quantity and quality of demand,” Peter Chatwell, a fixed-income strategist at Credit Agricole CIB in London, said today by e-mail. France sold 5.395 billion euros of bonds maturing in 2017, 2018 and 2025. ECB policy makers meeting in Frankfurt today will keep the benchmark interest rate at a record low of 1 percent, according to all 52 economists in a Bloomberg survey. That decision is due at 1:45 p.m. local time and a press conference takes place 45 minutes later. To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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