Euro Bonds Decline On Peripheral Debt Worries

Italian government bonds slid, pushing 10-year yields to the highest in more than six weeks, as investors prepared for European Parliament elections that risk a voter backlash against austerity.

Spanish securities fell for a second day after European Central Bank Governing Council member Ewald Nowotny said negative deposit rates for the euro area “must still be thoroughly discussed,” raising the possibility that stimulus measures next month will disappoint investors. Portugal’s 10-year yield jumped to a one-month high after falling to the lowest since 2006 earlier this month.

“Elections are seen as an event risk,” said Luca Cazzulani, a senior fixed-income strategist at UniCredit SpA in Milan. “Strong performance, some disappointment about recent growth data and uncertainty of the election result provide an excuse to sell.”

Italian 10-year yields rose six basis points, or 0.06 percentage point, to 3.20 percent at 1:57 p.m. London time after climbing to 3.24 percent, the highest since April 4. The 4.5 percent securities due in March 2024 fell 0.495, or 4.95 euros per 1,000-euro ($1,370) face amount, to 111.025.

Spanish 10-year yields climbed three basis points to 3.04 percent. Rates on Portuguese bonds with a similar maturity climbed seven basis points to 3.94 percent and touched 3.96 percent, the most since April 14. They fell to 3.44 percent on May 9, the lowest since January 2006.


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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