Tuesday Jul 29, 2014 Search
Weather | Athens
31o C
23o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
BlueBay, BlackRock see euro area bond rally fading out

By Lucy Meakin and Neal Armstrong

The advance in euro-area government bonds that pushed the 10-year yields of Ireland, Italy and Spain to record lows today is about to end, according to investors from BlueBay Asset Management LLP to BlackRock Inc.

Italian 30-year yields fell below 4 percent for the first time since 2006 as banks from Goldman Sachs Group Inc. to UBS AG predict policy makers will cut borrowing costs next month. European Central Bank President Mario Draghi said yesterday officials are “comfortable” about taking further action if needed. Portugal’s yield spread over German bunds shrank to the narrowest in four years after Standard & Poor’s raised the nation’s credit-rating outlook to stable from negative.

“Markets have clearly moved to expect a rate cut as a minimum at the June meeting,” said Mark Dowding, a money manager in London at BlueBay, which oversees $57.8 billion. “The burden of proof is in the data and Draghi may find it difficult to deliver in June. The market is getting ahead of itself. The sense in the periphery is that we’ve now seen the vast majority of the spread tightening that we’re looking for.”

Spain’s 10-year yield climbed three basis points, or 0.03 percentage point, to 2.92 percent at 4:51 p.m. London time after sliding to 2.85 percent, the lowest since Bloomberg began compiling the data in 1993. The 3.8 percent bond due in April 2024 fell 0.29, or 2.90 euros per 1,000-euro ($1,377) face amount, to 107.545.

Italy’s 10-year yield increased four basis points to 2.95 percent after declining to 2.89 percent. The rate on the nation’s 30-year bonds dropped to 3.985 percent, the least since January 2006.

Staff Projections

“The Governing Council is comfortable with acting next time, but before we want to see the staff projections that will come out in the early June,” Draghi said yesterday in Brussels after the ECB kept its benchmark rate at a record-low 0.25 percent. “There wasn’t a decision today. It’s a preview of the discussion we will have next month.”

Goldman Sachs and UBS predict the ECB will cut its refinancing rate to 0.1 percent and its deposit rate to minus 0.15 percent at its June 5 meeting. JPMorgan Chase & Co., Nordea Bank AB, Danske Bank A/S, and UniCredit SpA also revised their forecasts following yesterday’s press conference, and now expect interest-rate cuts next month.

Governing Council member Erkki Liikanen told Bloomberg in Helsinki today that Draghi’s signals yesterday reflected the central bank’s “common view.”

Speculation of further easing by the central bank has pushed down the yields of peripheral nations. The average yield to maturity on bonds from Greece, Ireland, Italy, Portugal and Spain fell to 2.13 percent yesterday, the least in the euro era, according to Bank of America Merrill Lynch indexes.

‘QE Carrot’

“As long as Draghi continues to say the ECB will try to be as accommodative as possible, and dangle the QE carrot, people will buy these bonds on expectation peripheral yields will converge with Germany’s,” Grant Peterkin, Geneva-based senior portfolio manager in fixed income at Lombard Odier Investment Managers, which oversees $48 billion, said yesterday.

“Because everyone is long peripheral bonds and credit, it could be tricky when people realize what they are holding and want to get out of these positions,” he said, referring to a bet an asset will rise.

Draghi’s comments indicate the ECB is unlikely to extend its stimulus measures to asset purchases, according to Scott Thiel, head of European and global bonds in London at BlackRock, the world’s largest fund manager.

Portugal, Slovenia

“In the European periphery we remain invested in Portuguese and Slovenian government bonds,” Thiel wrote yesterday in an e-mailed report. “However, given their significant spread compression to German bund yields in recent weeks and in light of excessive market expectations for imminent quantitative easing in the euro zone, we have reduced these positions.”

Portugal’s bond yields have fallen by more than half since September amid easing concern the country will need more aid. The nation’s 10-year yield rose eight basis points to 3.54 percent today, down from 7.45 percent on Sept. 16. The rate on Slovenia’s 10-year bond was little changed at 3.40 percent.

German 10-year bund yields were little changed at 1.45 percent. The extra yield investors demand to hold similar-maturity Portuguese securities over bunds narrowed to as little as 199 basis points today, the least since May 2010.

Volatility on Austrian bonds was the highest in euro-area markets today, followed by those of the Netherlands and Germany, according to measures of 10-year debt, the yield spread between two- and 10-year securities and credit-default swaps.

Irish 10-year yields fell as low as 2.643 percent, sliding beneath the rate on similar-maturity U.K. bonds for the first time since 2008. The U.K. 10-year gilt yield increased four basis points to 2.68 percent.

Spain’s government securities returned 8.1 percent this year through yesterday, according to Bloomberg World Bond Indexes. Portugal’s gained 16 percent, Italy’s 7.7 percent and Germany’s earned 3.3 percent.

[Bloomberg]

ekathimerini.com , Monday May 12, 2014 (12:44)  
Great margin for growth in exports
Parliament’s Budget Office says third bailout may be needed
Ryanair ‘not particularly interested’ in Cyprus Air
August 2 expected to be Greek tourism’s D-day
Ministry appeals to keep limit on prescriptions
Faced with the prospect that its attempts to rein in spending on medicines will be scuppered, the Health Ministry appealed on Monday against a Council of State ruling to temporarily suspend ...
Universities aghast at new schools opening
University officials have decried the government’s decision to open two new departments at the same time that funding for the tertiary institutions continues to be slashed. It emerged that t...
Inside News
VOLLEYBALL
Volleyball national team second in European League
Much as the national volleyball team tried to repeat in the finals of the European League the feat it had achieved in the semifinals, it failed to overturn the advantage Montenegro had got f...
SOCCER
Ranieri says he has little to change in Greek national team
The Hellenic Football Federation (EPO) presented Claudio Ranieri as the new Greece coach for the next couple of years, after the Italian manager signed his contract in Athens on Friday. “I l...
Inside Sports
COMMENTARY
Weighing all the factors
Certain people in the know continue to believe that snap elections will take place in the fall. Prime Minister Antonis Samaras is obviously aware of this trend, which is why he told Parliame...
EDITORIAL
Clear rules, for everyone
If we want to deal with the economic crisis, we need clear rules. A large number of individuals and businesses have amassed huge debts they cannot service. And some worrying symptoms have al...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Ministry appeals to keep limit on prescriptions
2. Great margin for growth in exports
3. Universities aghast at new schools opening
4. Greece to hold next talks with troika in Paris, not Athens
5. Anastasiades sees lack of progress on Cyprus talks
6. Supreme Court deputy prosecutor says ex-finance chief should be tried over ‘Lagarde list’
more news
Today
This Week
1. Defense Minister Avramopoulos to represent Greece at European Commission
2. Tree collapses in village square, killing nine-year-old boy
3. Euro inflation seen testing ECB patience as stimulus takes time
4. Minister mulls fixing food and drink prices at non-private beaches
5. Maziotis moved to Diavata Prison in Thessaloniki
6. Multi-bill containing prior actions ready for Parliament
Today
This Week
1. Climber dies in Mount Olympus fall
2. Unequal after death
3. Greek sovereign debt at 174.1 percent of GDP in first quarter
4. Hedge fund Dromeus turns Greek tragedy to triumph with 160 pct gain
5. Quadriplegic woman on life support 'dies due to unpaid power bills'
6. Front-line threats
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2014, H KAΘHMEPINH All Rights Reserved.