ECONOMY

Spanish bond gains push yield to record low as Greek debt rises

Spanish 10-year government bonds rose, pushing yields to a record low, helped by greater investor appetite for risk that drove stocks higher amid the prospect of European Central Bank purchases of sovereign debt.

The securities outperformed their German peers for a fourth day, reducing the premium that investors get for holding the Spanish debt to the least in almost two weeks. Greece’s three- year notes rose after a poll yesterday showed the lead of the anti-austerity Syriza party narrowed before the second round of a presidential vote this week. Portuguese 10-year yields dropped to a record.

“The market when you look at equities is generally in an upturn, the mood I would say is relatively positive,” said Luca Cazzulani, a senior fixed-income strategist at UniCredit SpA in Milan. “The possibility that we will get QE is something that will be positive for the periphery, so at the margin you should expect some support.”

Spain’s 10-year yield fell three basis points, or 0.03 percentage point, to 1.67 percent at 10:08 a.m. London time and reached 1.668 percent, the lowest since Bloomberg began compiling the data in 1993. The rate dropped 18 basis points last week, the steepest decline since the period ended Sept. 5. The 2.75 percent bond due in October 2024 rose 0.275, or 2.75 euros per 1,000-euro ($1,227) face amount, to 109.70.

German Yields

Germany’s 10-year yield was little changed at 0.60 percent, having dropped to a record 0.565 percent on Dec. 17.

That pushed the yield difference, or spread, with the Spanish securities to as low as 107 basis points, the least since Dec. 9. The gap fell 15 basis points last week, the biggest narrowing since the period through Sept. 5.

Spain’s debt earned 16 percent for investors this year through Dec. 19, beating Italy’s 15 percent return and 9.9 percent for Germany, according to Bloomberg World Bond Indexes. Portugal has had the biggest gain in the region with 22 percent.

Greece’s three-year yield fell 21 basis points to 9.36 percent, pushing the drop since Dec. 15 to 90 basis points. Ten- year rates fell 19 basis points to 8.24 percent.

[Bloomberg]