March 23 (Bloomberg) -- Irish two-year notes slumped, leading the bonds of the region’s most-indebted nations lower, on concern a permanent solution to the fiscal crisis will elude European Union leaders meeting at a summit starting tomorrow.
The declines drove the yield on the Irish security to more than 10 percent for the second consecutive day, while the extra yield investors demand to hold the nation’s 10-year bonds instead of German bunds climbed to a record. Portuguese bonds slid as Prime Minister Jose Socrates faces a vote today against his deficit-cutting plan that may spur early elections and the need for an EU bailout.
“It’s death by a thousand cuts,” said Charles Diebel, head of market strategy at Lloyds Bank Corporate Markets in London. “We’re waiting for Portugal. There isn’t actually a solution to the problem. Yields remain at unsustainable levels, technically forcing insolvency.”
The yield on the two-year Irish note surged 63 basis points to 10.50 percent as of 11 a.m. in London, jumping 141 basis points, or 1.41 percentage points, in the past three days. The 10-year yield advanced 30 basis points to 10.14 percent, widening the spread over bunds by 32 basis points to 690 basis points. It earlier increased to 694 basis points. The yield on the Portuguese 10-year bond climbed 10 basis points to 7.59 percent, with the similar-maturity Greek yield up four basis points to 12.56 percent.
Portuguese Vote
Portugal’s lawmakers will discuss the government’s program of austerity measures at 3 p.m. in Lisbon. The opposition Social Democratic and Communist parties both pledged yesterday to table resolutions against the plan.
“The likelihood that the Portuguese government will fall this week looks high,” Nicola Mai, a London-based economist at JPMorgan Chase & Co., said in a note yesterday. “This suggests that the sovereign will likely access” the EU’s rescue fund “in the near term, despite the current government’s efforts to avoid this outcome.”
The yield on the bund fell three basis points to 3.23 percent, with the price rising 2.3 euros per 1,000-euro ($1,419) face amount, to 93.96. The two-year note yield dropped two basis points to 1.68 percent.
Germany sold an additional 3.4 billion euros of the 10-year bund, the euro-region’s benchmark government security, at an average yield of 3.24 percent. Investors bid for 2.2 times the amount of bonds on offer, up from a so-called bid-to-cover of 1.9 at the previous auction of the securities on Feb. 16.
Bund Demand
Investor demand for the bonds was “very strong,” Chiara Cremonesi, a strategist at Unicredit Bank AG in London, said in an e-mailed note. “Risk aversion, mainly driven by peripheral jitters, the fact that this will be the last reopening of this benchmark, may have been supportive factors for demand.”
German bonds had declined this week as European Central Bank policy makers including President Jean-Claude Trichet reiterated that they may raise interest rates as soon as next month to contain an inflation rate that has quickened past their 2 percent target, even as the region grabbles with a debt crisis that forced Greece and Ireland to seek outside aid.
German government bonds have handed investors a loss of 1.8 percent this year, with U.S. Treasuries returning 0.5 percent, according to indexes compiled by the European Federation of Financial Analysts Societies and Bloomberg. Greek bonds returned 1.4 percent even as they lost 1.1 percent this month. Irish securities have lost 4.2 percent this year, while Portuguese debt dropped 4.1 percent, the EFFAS indexes show.
Source: www.businessweek.com
The declines drove the yield on the Irish security to more than 10 percent for the second consecutive day, while the extra yield investors demand to hold the nation’s 10-year bonds instead of German bunds climbed to a record. Portuguese bonds slid as Prime Minister Jose Socrates faces a vote today against his deficit-cutting plan that may spur early elections and the need for an EU bailout.
“It’s death by a thousand cuts,” said Charles Diebel, head of market strategy at Lloyds Bank Corporate Markets in London. “We’re waiting for Portugal. There isn’t actually a solution to the problem. Yields remain at unsustainable levels, technically forcing insolvency.”
The yield on the two-year Irish note surged 63 basis points to 10.50 percent as of 11 a.m. in London, jumping 141 basis points, or 1.41 percentage points, in the past three days. The 10-year yield advanced 30 basis points to 10.14 percent, widening the spread over bunds by 32 basis points to 690 basis points. It earlier increased to 694 basis points. The yield on the Portuguese 10-year bond climbed 10 basis points to 7.59 percent, with the similar-maturity Greek yield up four basis points to 12.56 percent.
Portuguese Vote
Portugal’s lawmakers will discuss the government’s program of austerity measures at 3 p.m. in Lisbon. The opposition Social Democratic and Communist parties both pledged yesterday to table resolutions against the plan.
“The likelihood that the Portuguese government will fall this week looks high,” Nicola Mai, a London-based economist at JPMorgan Chase & Co., said in a note yesterday. “This suggests that the sovereign will likely access” the EU’s rescue fund “in the near term, despite the current government’s efforts to avoid this outcome.”
The yield on the bund fell three basis points to 3.23 percent, with the price rising 2.3 euros per 1,000-euro ($1,419) face amount, to 93.96. The two-year note yield dropped two basis points to 1.68 percent.
Germany sold an additional 3.4 billion euros of the 10-year bund, the euro-region’s benchmark government security, at an average yield of 3.24 percent. Investors bid for 2.2 times the amount of bonds on offer, up from a so-called bid-to-cover of 1.9 at the previous auction of the securities on Feb. 16.
Bund Demand
Investor demand for the bonds was “very strong,” Chiara Cremonesi, a strategist at Unicredit Bank AG in London, said in an e-mailed note. “Risk aversion, mainly driven by peripheral jitters, the fact that this will be the last reopening of this benchmark, may have been supportive factors for demand.”
German bonds had declined this week as European Central Bank policy makers including President Jean-Claude Trichet reiterated that they may raise interest rates as soon as next month to contain an inflation rate that has quickened past their 2 percent target, even as the region grabbles with a debt crisis that forced Greece and Ireland to seek outside aid.
German government bonds have handed investors a loss of 1.8 percent this year, with U.S. Treasuries returning 0.5 percent, according to indexes compiled by the European Federation of Financial Analysts Societies and Bloomberg. Greek bonds returned 1.4 percent even as they lost 1.1 percent this month. Irish securities have lost 4.2 percent this year, while Portuguese debt dropped 4.1 percent, the EFFAS indexes show.
Source: www.businessweek.com
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