Spanish bonds fall on growth concern as German yields at records

April 10 (Bloomberg) -- Spanish bonds fell and German yields slid to records on concern Europe’s debt crisis is deepening and as weaker-than-forecast U.S. job growth signaled the global economic expansion may be slowing.

Ten-year German bunds, Europe’s benchmark government securities, outperformed all euro-area peers on bets that European Central Bank loans are proving insufficient to stop the crisis from spreading through the region. Spanish debt dropped for a fourth day even as the government repeated a pledge to cut the deficit. A Swiss sale of six-month bills drew a negative yield. Austria and the Netherlands sold debt, while France auctions as much as 7.8 billion euros ($10.2 billion) of bills.

“We have a renewed concern in the euro region as the debt problem hasn’t gone away despite the liquidity support from the European Central Bank,” said Vincent Chaigneau, the global head of interest-rate strategy at Societe Generale SA in Paris. “The poor non-farm payroll data out of the U.S. only exacerbated the risk-off sentiment. Peripheral bond yields are likely to continue to rise in the near term.”

Spain’s 10-year yield jumped 17 basis points to 5.92% at 12:22 p.m. London time, and rose to 5.94 percent, the highest since Dec. 12. That increased the additional yield investors demand to hold the securities over similar-maturity bunds by 21 basis points to 424 basis points. The 5.85% securities maturing in January 2022 dropped 1.22, or 12.20 euros per 1,000-euro face amount, to 99.435.

German Records

Volatility on Spanish bonds was the highest in euro-area markets followed by Germany, according to measures of 10-year bonds, two- and 10-year yield spreads and credit-default swaps. The change in the yield was twice the 90-day average.

Spanish 10-year yields have risen to the most since the ECB started providing three-year loans in December in its longer- term refinancing operations.

Germany’s 10-year yield fell five basis points to 1.684 percent, approaching its all-time low of 1.636% set on Sept. 23. The two-year note yield was little changed at 0.13% after dropping to 0.112 percent, the lowest since Bloomberg began collecting the data in 1990. The five-year yield declined as much as five basis points to 0.664 percent, also the least on record.

Spain’s government yesterday repeated its pledge to reduce the nation’s deficit to 3% of gross domestic product next year. Prime Minister Mariano Rajoy met health and education ministers to discuss spending cuts of more than 10 billion euros.

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