Spanish and Italian government bonds rose after the European Central Bank bought the nations’ debt, the ECB’s fifth consecutive day of sovereign purchases.
The gains trimmed the sixth straight weekly decline for Italy’s 10-year securities. French bonds climbed relative to benchmark German bunds for a third day, reducing the additional yield investors demand to hold the debt. The euro strengthened 0.5 percent against the dollar, snapping a four-day drop.
“The market, be it peripherals or be it bunds, it’s all trading off these expectations” of ECB buying, said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich. “Once you see the ECB come into the market, it’s a damping factor for bunds.”
Ten-year Italian yields fell 11 basis points, or 0.11 percentage point, to 6.73 percent at 10:34 a.m. London time. The 4.75 percent securities due in September 2021 rose 0.71, or 7.10 euros per 1,000-euro ($1,352) face amount, to 86.71. The equivalent Spanish bond yields declined 12 basis points to 6.76 percent, with the price rising to 93.49 percent of face value.
The difference in yield, or spread, between French and German 10-year bonds narrowed 10 basis points to 164 basis points. Bund yields were little changed at 1.89 percent. Yields earlier declined after the German newspaper Frankfurter Allgemeine Zeitung reported the ECB set a 20 billion-euro weekly limit for its bond purchases.
An ECB spokesman in Frankfurt declined to comment on whether the central bank had bought the Spanish and Italian debt when contacted today by phone. Five people with knowledge of the deals said it bought Italian securities and three people said it purchased Spanish debt. They declined to be identified because the trades are private.
Bunds were little changed in the week and French securities fell as data from Japan’s Ministry of Finance showed investors have been reducing their holdings of the nations’ securities this year, while adding Australian government bonds.
Japanese investors added 853 billion yen ($11 billion, 8.2 billion euros) of Australian bond and notes from January to September, according to Ministry of Finance data. Over that period, they reduced by 1.5 trillion yen and 236 billion yen holdings in German and French debt, while also cutting investments in Italy, Ireland, Portugal and Greece.
German bunds returned 8.3 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish debt handed investors a 1.9 percent loss, while Italian securities lost 8.8 percent.
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