Spanish Bonds Rise After Auction as EU Leaders Head for Summit

Spanish Bonds Rise After Auction as EU Leaders Head for Summit

Spanish government bonds rose for a third day after the nation sold more than its maximum target at an auction and as European Union leaders gathered for a two-day summit in Brussels.

Spain’s 10-year yields dropped to the lowest level since April as German Chancellor Angela Merkel told lawmakers in Berlin that stability was taking hold after three years of crisis in the euro area. Spanish securities surged yesterday after Moody’s Investors Service said this week it would keep the country’s credit rating at investment grade. France auctioned notes and inflation-linked bonds today and Ireland sold bills.

“The Spanish auction went as well as could be expected,” said Elisabeth Afseth, a fixed-income analyst at Investec Bank Plc in London. “Yields are a bit lower and the volumes they managed to do on the 10-year was a positive. Some positive comments out of the European meetings today should also offer some support.”

Spain’s 10-year yield fell six basis points, or 0.06 percentage point, to 5.41 percent at 12:42 p.m. London time after dropping to 5.39 percent, the lowest level since April 3. The 5.85 percent bond due in January 2022 gained 0.425, or 4.25 euros per 1,000-euro ($1,312) face amount, to 103.125.

EU ‘Solidarity’
Merkel, addressing German lower-house lawmakers hours before the EU leaders meeting, proposed a European Union “solidarity” fund to bolster competitiveness in struggling member countries.

“To give all member states the opportunity then to improve their competitiveness and to actually be able to implement these commitments, I propose that we introduce a new element of solidarity,” she said in her speech today at the Reichstag parliament building.

Moody’s said on Oct. 16 it would leave Spain’s credit rating at investment grade, citing a reduction in the risk of the nation losing market access because of the European Central Bank’s willingness to buy its bonds.

Spain sold a combined 4.61 billion euros of securities due in 2015, 2016 and 2022 today, the central bank said, compared with a maximum target of 4.5 billion euros.

The Treasury auctioned its benchmark 10-year bonds at an average yield of 5.458 percent, down from 5.666 percent when they were last sold on Sept. 20. The 2015 securities were sold at an average yield of 3.227 percent and the 2016 notes were issued at 3.977 percent.