Spain’s 10-year bonds fell, widening the yield difference with benchmark German bunds to the most in almost two weeks, after a sale of three- and five-year debt and as investors awaited the Federal Reserve’s policy decision.
Italian securities declined for a third day amid signs this year’s rally in higher-yielding euro-area bonds is losing momentum. Federal Open Market Committee officials led by Janet Yellen will release a new set of quarterly predictions for unemployment, inflation, economic growth and the federal funds target rate. Portuguese bonds slipped for a fifth day even as the nation sold 1 billion euros ($1.35 billion) of 12-month bills at the lowest rate in nine years.
“There are still a lot of investors waiting for setbacks in peripheral bonds,” said Felix Herrmann, a research analyst at DZ Bank AG in Frankfurt. “We have some new members on the FOMC board who are thought to be in the hawkish camp, so there is some uncertainty there as well.”
Spain’s 10-year yield climbed five basis points, or 0.05 percentage point, to 2.75 percent at 4:33 p.m. London time. The 3.8 percent bond due in April 2024 fell 0.42, or 4.20 euros per 1,000-euro face amount, to 108.93. The additional yield, or spread, investors demand to hold Spanish 10-year bonds over German peers widened seven basis points to 137 basis points, the highest since June 5.
Portugal’s 10-year yield rose six basis points to 3.53 percent and the rate on similar-maturity Italian bonds climbed two basis points to 2.85 percent.
Euro-area bonds from Portugal to Greece have surged this year, narrowing the yield spread with German bunds, amid signs the euro-area debt crisis is being consigned to history. Portugal exited its bailout program last month without the need for a precautionary aid program, Greece returned to international debt markets in April after four years and Cyprus today became the final bailed-out nation to offer securities in a sale of five-year notes via banks.
Spain sold about 1.5 billion euros of three-year notes to yield 0.876 percent and 1.5 billion euros of debt due in July 2019 at 1.402 percent today. The nation has now covered 67.5 percent of its 2014 medium- and long-term funding program, according to the Economy Ministry.
Portugal allotted June 2015 bills at an average yield of 0.364 percent, compared with 0.617 percent at a previous auction on May 21. It was the lowest rate for comparable-maturity debt since Bloomberg began compiling the data in March 2005. The Lisbon-based debt office also sold 500 million euros of three-month bills to yield 0.18 percent.
Germany allotted 4.1 billion euros of 10-year bunds at an average yield of 1.39 percent, down from 1.41 percent at a previous auction on May 21 and the lowest rate since March 2013. Benchmark 10-year yields fell three basis points to 1.38 percent.
Spain’s securities returned 9.3 percent this year through yesterday, Bloomberg World Bond Indexes show. Portugal’s earned 16 percent, Italy’s 8.4 percent and Germany’s gained 3.9 percent.