Tuesday May 26, 2015 Search
Weather | Athens
14o C
09o 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)  
Overhaul planned for car taxation
Third-country tourists posted major increase up to 2014
Firms write off a tenth of turnover in bad debts
Counter-incentives against early retirement
Ranks of civil service shrink, but not for long
The size of the Greek civil service dipped in the first quarter of the year, continuing the downward trend that started in 2009, but it is expected to grow again, as the government has pledg...
Debt talks resume amid concerns over differences, looming repayment, political upheaval
Government officials on Monday expressed confidence that Greece was close to a deal with creditors that would allow loans to be unlocked but pressure is growing on Prime Minister Alexis Tsip...
Inside News
SOCCER
Berg brace gives Panathinaikos four-point lead
Panathinaikos beat Atromitos on Sunday and took advantage of the goalless draw between PAOK and Asteras Tripolis to open a four-point gap from PAOK at the top of the Super League play-off mi...
SOCCER
Reds add Cup to league trophy with 3-1 win over Xanthi
Olympiakos completed a league-and-cup double on Saturday by beating Xanthi 3-1 in the Greek Cup final at the Olympic Stadium of Athens, that was more balanced than the final score suggests. ...
Inside Sports
COMMENTARY
Greece needs a second election
Most scenarios facing Greece are bleak. The country could default, introduce capital controls, forcibly convert savers’ deposits into bank capital, quit the euro and so forth. But there is s...
COMMENTARY
No more ´quick and dirty´ fixes for Greece
International Monetary Fund Managing Director Christine Lagarde correctly said last week that the protracted negotiations between Greece and its official creditors required «a comprehensive ...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Overhaul planned for car taxation
2. Third-country tourists posted major increase up to 2014
3. Firms write off a tenth of turnover in bad debts
4. Counter-incentives against early retirement
5. Halt in payments stifles market
6. Ranks of civil service shrink, but not for long
more news
Today
This Week
1. Overhaul planned for car taxation
2. No more 'quick and dirty' fixes for Greece
3. ND's Bakoyannis fears capital controls over long weekend
4. Brussels Group talks to resume Tuesday with VAT, pension topping agenda
5. Greece calls on creditors to compromise as IMF payment nears
6. Greece needs a second election
Today
This Week
1. Conspiracy madness
2. National self-awareness put to the test
3. Albanian demarche raises concerns about possible territorial claims over Greece
4. Why Greece won't hold referendum on reforms
5. Greek endgame nears for Tsipras as bank collateral hits buffers
6. Hotel contracts with a ‘Greek default clause’
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2015, H KAΘHMEPINH All Rights Reserved.