Spanish debt trails behind with still no government formed Calling for a bonds selloff ‘premature’: Societe Generale Share on Facebook Share on Twitter Italy’s government bonds moved full circle and headed for a third weekly advance after the Bank of England’s decision to cut interest rates reinforced the global trend toward easier monetary policy that supports fixed-income securities. Italian 10-year yields fell to the lowest in 17 months after rising earlier in the week with counterparts across the globe as a weak Japanese bond auction prompted some investors to question the sustainability of the rally in sovereign debt. Spain’s 10-year bond yields climbed earlier this week before the BOE Thursday cut its key interest rate and said it would resume its asset purchases. That added to speculation the European Central Bank will increase its stimulus measures at its next policy meeting in September. Click here to see Bloomberg’s interview with Steven Major, HSBC’s head of global fixed-income research. Investors had shown signs of rebelling after a rush to sovereign debt in the wake of Britain’s June 23 decision to leave the European Union pushed yields on about a third of developed-market bond markets below zero. Yields jumped after the Bank of Japan left bond buying and its negative deposit rate unchanged last month, damping demand for government debt. ‘Crying Wolf’ With some traders speculating that central banks are running out of ammunition, demand for fixed-income assets has also been threatened by the prospect of fiscal stimulus from governments that typically boosts supply and depresses prices. “The bears who have been crying wolf for so long have jumped on the BOJ disappointment and called for a bond selloff,� analysts at Societe Generale SA, including Vincent Chaigneau, London-based global head of rates and foreign-exchange strategy, wrote in a client note Friday. “The BOE has reminded everyone this is both premature and exaggerated.� Italy’s 10-year bond yield was little changed at 1.14 percent as of 10:42 a.m. London time, having earlier dropped to 1.13 percent, the lowest since March 2015. The price of the 1.6 percent security due in June 2026 was 104.33 percent of face value. The yield rose to as much as 1.23 percent on Aug. 3. Spanish 10-year bonds yielded 1.02 percent, little changed from the end of last week and within two basis points of a record low reached on Aug. 1. Benchmark German 10-year bund yields were little changed at minus 0.09 percent, set for a three basis-point increase this week.

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