Milan (ANTARA News/AKI/Bloomberg) - Spanish and Italian government bonds rose for a third straight day, cutting the extra yield investors demand to hold the 10-year securities instead of German bunds, as the European Central Bank purchased the debt.
German bonds fell, pushing the 10-year yield up from within three basis points of the lowest since October. Greece sold 812.5 million euros (1.2 billion dollars) of 182-day bills, while Italy will offer as much as 6.5 billion euros of 366-day securities on Wednesday. Spain?s 10-year yield touched the lowest since December, while Italy?s fell to a one-month low.
?In the near term we?re likely to see a further decline in Spanish and Italian spreads,? said Elwin de Groot, a senior market economist at Rabobank Nederland in Utrecht.
?Now that the ECB has taken this decision, they?re likely to continue with this for some time. The ECB will make a strong statement with their purchases.?
The yield on 10-year Italian bonds fell 11 basis points to 5.18 percent at 5:02 p.m. in London, after reaching 5.08 percent, the least since July 6 and below the danger level of six percent. That narrowed the difference in yield, or spread, over similar-maturity German debt by 22 basis points to 281 basis points.
The yield spread between Spanish debt and bunds narrowed 18 basis points to 272 basis points, as the yield on the Spanish securities dropped eight basis points to 5.08 percent, after being as low as 4.98 percent, the least since Dec. 3.
The ECB bought Italian and Spanish government bonds on Tuesday, according to three people with knowledge of the transactions, who declined to be identified because the trades are confidential.
A spokesman for the central bank declined to comment. The ECB started buying yesterday, after Standard & Poor?s lowered the U.S. rating by one level to AA+ with a negative outlook on Aug. 5. Moody?s Investors Service and Fitch Ratings have affirmed the U.S. at AAA.
Spanish and Italian 10-year yields slid yesterday by the most since the euro?s introduction as the ECB moved to stabilize markets and prevent the sovereign-debt crisis that forced Greece, Ireland and Portugal to seek aid from spreading to the euro area?s third- and fourth-biggest economies.
Spanish bonds have returned 4.8 percent this year, while Italian debt handed investors a 0.5 percent loss, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German debt gained 4.9 percent, while U.S. Treasuries rose 6.4 percent, the indexes show.
The ECB may have spent more than 10 billion euros Monday, with purchases ?heavily concentrated? in Italian securities, according to Ciaran O?Hagan, head of European interest-rate strategy at Societe Generale SA in Paris.
Deutsche Bank AG analysts estimated that the purchases reached 7 billion euros, Jim Reid, a strategist at the bank in London, wrote in a research note on Tuesday.
Euro-area leaders agreed on July 21 to empower the 440- billion euro European Financial Stability Facility bailout fund to buy bonds in the secondary market.
http://antaranews.com
