Spanish and Italian bonds fell on concern divisions among European officials will hamper efforts by finance ministers meeting in Brussels to stem the region’s sovereign-debt crisis.
Bloomberg, December 6th, 2010
The declines drove the extra yield investors demand to hold the bonds of high-deficit nations instead of benchmark German securities higher for the first time in four days. Irish and Portuguese bonds outperformed their peers as traders said central banks bought the nations' debt today. Ministers will discuss today details of a permanent mechanism to support economies struggling to raise funding, which is intended to replace the European Financial Stability Facility in 2013.
“The uncertainty over the euro mechanism is being priced into the market and that’s driving the yield movements,” said Michael Kruse, a fixed-income analyst in Zurich at Credit Suisse Group AG. “The uncertainty is not great for the markets.”
The 10-year Spanish bond yield climbed 12 basis points to 5.20 percent as of 4:11 p.m. in London. The 4.85 percent security due in October 2020 fell 0.87, or 8.7 euros per 1,000- euro ($1,329) face amount, to 97.33. The extra yield, or spread, with bunds increased 10 basis points to 229 basis points, or 2.29 percentage points.
Italian 10-year yields rose five basis points to 4.5 percent, and the yield on similar-maturity Belgian debt advanced five basis points to 3.96 percent. Credit-default swaps on Italy jumped 8.5 basis points to 217.5, while those on Spain increased 20 basis points to 317, according to CMA prices. Contracts on Ireland were 12.5 basis points higher at 555 and those for Portugal were up 15.5 basis points to 443.5.
The euro slumped 0.9 percent to $1.3292, snapping a three- day gain.
