Spanish Bonds Fall while the Country Resists Bailout

Spain’s government bonds fell for a second day as the nation resists seeking a bailout and European Central Bank President Mario Draghi said the country still faces significant challenges.

Spanish securities declined after the country sold 3.99 billion euros ($5.17 billion) of two-, three- and five-year notes, while holding back from seeking financial aid that would trigger ECB purchases of its debt. German two-year notes fell after Draghi said policy makers didn’t discuss an interest-rate cut at their policy meeting today, where they kept the refinancing rate at a record-low 0.75 percent. Top-rated Finnish bonds also slipped as the ECB chief said the euro is “irreversible.”

“The market wants to see a request for aid and this is pressuring Spanish bonds,” said Alessandro Giansanti, a senior strategist at ING Groep NV in Amsterdam. “The auction went quite well in terms of the demand because the bonds were sold in the area where the ECB may buy, if Spain asks for help.”

Spanish two-year yields climbed six basis points, or 0.06 percentage points, to 3.29 percent at 4:25 p.m. London time. The 4.75 percent security due July 2014 fell 0.115, or 1.15 euros per 1,000-euro face amount, to 102.515. The 10-year yield rose nine basis points to 5.90 percent.

Spain sold 2015 notes at an average yield of 3.956 percent, up from 3.845 percent at the previous sale on Sept. 20. The country auctioned securities due in October 2014 at a yield of 3.282 percent and July 2017 debt at 4.766 percent. Investors bid for 1.98 times the number of three-year notes allotted, up from 1.56 times last month.

Bloomberg

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell