Tags: demand | Italian | Spanish | bonds

WSJ: Demand Flourishes for Italian, Spanish Bonds

By    |   Thursday, 10 Apr 2014 12:36 PM

Investors are showing a voracious appetite for Italian and Spanish government bonds amid indications the European Central Bank (ECB) will keep short-term interest rates near zero for a long time.

Yields on Italian and Spanish government bonds have fallen to their lowest premium relative to Treasurys in four years, The Wall Street Journal reports.

"There are many investors who shunned these markets for a number of years, who are now returning,'' Mark Dowding, senior fixed-income manager at BlueBay Asset Management, tells the paper.

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The 10-year Italian government note yield stood at 3.17 percent early Friday, with an  identical 3.17 percent yield for Spain's equivalent note. Meanwhile, the 10-year Treasury yielded 2.64 percent early Friday.

The 10-year Italian bond peaked at 7.4 percent in November 2011, while the 10-year Spanish bond peaked at 7.6 percent in July 2012.

With eurozone growth barely above zero and its annual inflation only 0.5 percent, the ECB has promised to do whatever it takes to spark growth. At the same time, the Federal Reserve is cutting back on its stimulus.

The euro's strength also is boosting Italian and Spanish bonds. The currency has gained 6 percent against the dollar during the past six months.

Spain and Italy "have evolved from a vicious cycle to a virtuous cycle," Robert Tipp, chief fixed-income investment strategist for Prudential Financial, tells The Journal.

Meanwhile, Greece is issuing long-term bonds for the first time since its international bailout in 2010.

"Yields in Portugal, Italy, Spain and Ireland are no longer just compared to what is below them, but also now to what is above them," Owen Callan, a senior analyst at Danske Bank, tells Reuters. "As Greek yields fall, that should help provide further momentum in these markets."

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Investors are showing a voracious appetite for Italian and Spanish government bonds amid indications the European Central Bank (ECB) will keep short-term interest rates near zero for a long time.
demand, Italian, Spanish, bonds
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2014-36-10
Thursday, 10 Apr 2014 12:36 PM
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