Euro Borrowing costs fall after Spanish auction

Spain’s bonds advanced after the nation auctioned 10-year debt at the lowest yield since September 2010 as borrowing costs for governments across Europe decreased on bets interest rates will stay lower for longer.

Spain’s five-year notes gained for a third day as the sale raised more than its target. France allotted five-year debt at a record-low rate at a separate auction. Slovenia hired banks to organize meetings with bond investors, a day after scooping up twice the targeted amount in a domestic offering. Italian bonds pared gains as lawmakers failed to elect a successor to President Giorgio Napolitano in the first round of voting. Bunds fell as German lawmakers approved a rescue for Cyprus.

“It’s fairly clear that interest rates are going to be low for a very long time and yields are reacting,” said Elisabeth Afseth, a fixed-income analyst at Investec Bank Plc in London. “Spain sold debt at the lowest rate for a few years so it is all good on the government-bond side.”

Spain’s 10-year yield fell four basis points, or 0.04 percentage point, to 4.65 percent at 1:31 p.m. London time, and reached 4.61 percent, the lowest since Nov. 17, 2010. The 5.4 percent security maturing in January 2023 rose 0.285, or 2.85 euros per 1,000-euro ($1,305) face amount, to 105.805. The five- year note yield fell two basis points to 3.31 percent after reaching 3.26 percent, the lowest since Nov. 3, 2010.

The Spanish Treasury sold 4.71 billion euros of debt due between 2016 and 2023, beating a 4.5 billion-euro target. The 10-year bonds were sold at an average yield of 4.612 percent.


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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