Tuesday October 21, 2014 Search
Weather | Athens
24o C
11o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Euro periphery emerges as haven as bonds rise amid Ukraine feud

Lukanyo Mnyanda & Eshe Nelson

The euro area’s higher-yielding government bonds are emerging as a haven from emerging-market turmoil as the prospect of greater stimulus from the European Central Bank underpins demand for the securities.

Portuguese bonds outperformed their counterparts in the region Thursday, with 10-year yields falling to the lowest since December 2009. Irish and Italian yields touched record lows even as Ukraine accused Russia of fueling terrorism in its eastern provinces amid separatist unrest. The extra yield, or spread, that investors get for holding Italian 10-year debt instead of similar-maturity bunds shrank for a third day as Germany sold 3.4 billion euros ($4.7 billion) of the benchmark securities.

Less than two years after ECB President Mario Draghi deemed it necessary to pledge unlimited support for the euro-area’s most-indebted countries, investors that rejected those markets through the region’s debt crisis are turning back to them as the ECB considers expanding stimulus. Portugal’s borrowing costs fell to a nine-year low at a bill auction on Wednesday and Greece, whose debt load triggered the region’s sovereign turmoil, sold bonds last week for the first time since March 2010.

“It’s a sign of confidence when you get the periphery rallying when there is a flight to quality,” said Orlando Green, a fixed-income strategist at Credit Agricole SA’s corporate and investment bank unit in London. “Investors do want yields, but nonetheless they will still be selective of what assets to go for. The periphery is one of them they think is safe enough and offers the best risk-reward trade.”

Portugal’s 10-year yield fell 12 basis points, or 0.12 percentage point, to 3.74 percent at 12:19 p.m. London time. That’s down from a record of more than 18 percent set in January 2012 as the debt crisis provoked concern the euro area would splinter. The 5.65 percent bond maturing in February 2024 gained 1.085, or 10.85 euros per 1,000-euro face amount, to 115.40.

Rates on Irish securities with a similar maturity were little changed at 2.86 percent, having fallen earlier on Wednesday to 2.85 percent, the least since Bloomberg began collecting the data in 1991.

Draghi’s promise of a backstop is combining with speculation that policy makers will expand monetary stimulus to buoy bonds that investors shunned during the debt crisis. Ewald Nowotny, who also sits on the ECB’s governing council, last week identified June as a potential trigger point for easing policy further and said officials will discuss whether to embark on a debt-purchase program.

“The outlook for the periphery remains bright with the main driver being monetary policy,” said Luca Cazzulani, a senior fixed-income strategist at UniCredit SpA in Milan. “When it comes to what will happen in the next month or two, a lot will depend on how the ECB decides to continue with its monetary policy path and even more with its rhetoric.”

Italy’s 10-year yield slipped one basis point to 3.10 percent and reached 3.09 percent, the lowest since Bloomberg started collecting the data in 1993. The yield spread to bunds narrowed three basis points to 1.61 percentage point. Spain’s 10-year yield was at 3.07 percent, the lowest since September 2005.

Portuguese government bonds have returned 1.3 percent from the end of March through Tuesday, while their Irish counterparts earned 1.2 percent, according to Bloomberg World Bond Indexes. Investors who put money in the Stoxx Europe 600 Index in that period lost 2 percent including reinvested dividends, according to data compiled by Bloomberg,

“Peripherals remain very robust,” Michael Leister, a senior fixed-income strategist at Commerzbank AG in London, wrote in a note to clients dated Thursday. “Peripherals trade increasingly immune to swings in overall risk sentiment, decoupling from the sharp correction on equity markets over the past sessions.”

Demand for European bonds was boosted today as a report confirmed that the annual inflation rate in the euro area was 0.5 percent last month, the slowest in four years, matching a the median prediction from a Bloomberg survey. That’s a quarter of the ECB’s target, strengthening the prospects of policy makers in Frankfurt adopting more stimulus.

The spreads will continue to tighten as investors flee emerging-market turmoil by buying assets in the euro area, Peter Schaffrik, head of European rates strategy at Royal Bank of Canada in London, wrote in a client note.

“If there are any dangers for the European economies, it appears more likely that the ECB will act and ease policy further,” Schaffrik wrote on Wednesday. “This essentially prevents European peripheral assets from trading like a proper risky asset and thus trade stronger despite equity, emerging-market currency weakness.”

The yield difference between Spanish and German 10-year narrowed four basis points to 158 basis points, from almost 6.5 percentage points in July 2012.

Germany’s 10-year yield increased two basis points to 1.49 percent. Tuesday’s 1.47 percent close was the lowest since May.

Germany sold benchmark bunds maturing in February 2024 at an average yield of 1.49 percent on Wednesday. That’s down from 1.58 percent when the country last sold 10-year debt on March 19.

Portugal allotted 12-month bills at an average yield of 0.597 percent, down from 0.602 percent at a previous auction on March 19 and the lowest rate since Bloomberg began compiling data in March 2005.

[Bloomberg]

ekathimerini.com , Wednesday April 16, 2014 (14:40)  
Think-tank says political uncertainty slowing investment in Greece
Tax debts to Greek state exceed 70 billion euros
Greek 2013 budget gap revised down to 1.8 pct/GDP
Greece said to seek tailor-made plan for bailout exit
Greek farmers warn they´re warming up for protests
Greek farmers are warming up for extended protest action, representatives of their unions warned on Tuesday after meeting in Larissa, central Greece, over the weekend. Farmers, who are compl...
Accomplice of Greece´s Number 1 fugitive arrested while trying to leave country
Self-styled anarchist Polykarpos Georgiadis, linked to Greece's Number 1 fugitive, was arrested at Athens International Airport on Tuesday while trying to board a flight to Brussels, in viol...
Inside News
BASKETBALL
PAOK fans stop coach Markopoulos´s move to Olympiakos
Olympiakos is once again in the lookout for a new coach after the refusal of PAOK to release Soulis Markopoulos, while Panathinaikos defeated Kolossos on Rhodes on Monday to become the only ...
BASKETBALL
Reds lose to Nea Kifissia, search for new coach
Nea Kifissia recorded the biggest win of its short history in the top flight defeating Olympiakos 68-67 on Sunday, in a Basket League weekend marred by the abandonment of the Thessaloniki de...
Inside Sports
INTERVIEW
The past, present and future of the Greek debt crisis
For a decade, until mid-2012, Josef Ackermann was the CEO at Deutsche Bank. It was a position that earned him the nickname “shadow chancellor” of Germany and allowed him to play a decisive r...
COMMENTARY
Self-opposing coalition
Even though a number of polls see the total percentage of the two ruling parties trailing that of SYRIZA, New Democracy and PASOK are still in government and the leftists in opposition. This...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Greek farmers warn they´re warming up for protests
2. Accomplice of Greece´s Number 1 fugitive arrested while trying to leave country
3. Think-tank says political uncertainty slowing investment in Greece
4. Trial over 2012 torture of Egyptian bakery worker in Salamina begins
5. Tax debts to Greek state exceed 70 billion euros
6. Greek 2013 budget gap revised down to 1.8 pct/GDP
more news
Today
This Week
1. The past, present and future of the Greek debt crisis
2. Gang importing heroin into Greece busted
3. Self-opposing coalition
4. Gutsy rectors
5. Applications for heating oil subsidy set to start
6. SDOE to probe Proton Bank loan to Thessaloniki businessman
Today
This Week
1. Possible third figure in Amphipolis mosaic may be uncovered shortly
2. Greece to contribute 1 mln towards Gaza reconstruction
3. Greece nearing bailout exit, says gov't spokesperson after IMF talks
4. Istanbul skyscraper casts shadow over Greece's banking ambitions
5. Coalition shooting itself in the foot
6. GPO poll gives SYRIZA clear lead over New Democracy
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2014, H KAΘHMEPINH All Rights Reserved.