Italian bonds rise as political concern eases; Greek bonds climb

The Palazzo delle Finanze, the seat of the Italian Ministry of Finance The Palazzo delle Finanze, the seat of the Italian Ministry of Finance

Italian government bonds rose, reversing an earlier decline, as concern that Prime Minister Mario Monti’s resignation would derail the nation’s attempts to cut its debt load eased.

Spanish securities advanced after an auction of bills raised more than the maximum target set for the sale. Greece’s yields fell to the least since the nation’s debt was restructured in March as its offer to buy back sovereign debt expired. German bunds slipped on an increase in investor confidence to a seven-month high. Italy will sell as much as much as 6.5 billion euros ($8.4 billion) of one-year bills tomorrow and bonds due in 2015 and 2026 the following day.

“The initial fear was about uncertainty, as the timing of Monti’s resignation was unexpected, but we have seen some calm come back,” said Robin Marshall, director of fixed-income at Smith & Williamson Investment Management in London, which oversees the equivalent of $19 billion. The “auction should be fine but I think the fears will come back again as we go towards the election campaign, probably in” the first quarter, he told Maryam Nemazee on Bloomberg Television’s “The Pulse.”

Italian two-year yields fell seven basis points, or 0.07 percentage point, to 2.26 percent at 2:02 p.m. London time after climbing to 2.39 percent earlier today. The 6 percent note maturing in November 2014 rose 0.125, or 1.25 euros per 1,000- euro face amount, to 107.

The note yields reached 2.47 percent yesterday, the highest since Sept. 27, as former premier Silvio Berlusconi entered the race for a new leader, reinvigorating a campaign against austerity measures that were introduced to control the nation’s debt.

Spanish Bills

Spain sold a combined 3.89 billion euros of bills today. It auctioned 12-month securities at an average yield 2.556 percent, compared with 2.797 percent on Nov. 20, and 18-month debt at 2.778 percent, down from 3.034 percent. The Treasury had set an upper target for the offering at 3.5 billion euros.

The 10-year bond yield fell seven basis points to 5.50 percent.

Greece’s 10-year yield fell 58 basis points to 13.23 percent as state-run NET TV reported that banks offered additional bonds into the nation’s buyback to bring the operation up to its goal of 30 billion euros.

Greece is using a 10 billion-euro loan from Europe’s bailout fund to repurchase debt it issued earlier this year at around one third of face value, seeking to unlock bailout funds that have been frozen since June. The price of the 10-year security rose to 43.635 cents on the euro today.

German Bunds

German 10-year bund yields rose one basis point to 1.32 percent. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, climbed to 6.9 from minus 15.7 in November. Economists predicted a gain to minus 11.5, according to the median of 38 estimates in a Bloomberg News survey.

Volatility on Greek government bonds was the highest in the euro area today, followed by those of Ireland and Spain, according to measures of 10-year or equivalent-maturity debt, the spread between two- and 10-year securities, and credit default swaps.

Italian bonds returned 18 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish debt gained 4.3 percent and Germany’s rose 4.2 percent.

Bloomberg News

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