Two-year Spanish bonds fall, traders cite profit-taking

LONDON: Two-year Spanish and Italian bonds fell in price on Tuesday, with traders saying investors were taking profit after a sharp rally in short-dated peripheral paper made on the prospect of European Central Bank intervention, possibly in a month's time.

Two-year Spanish yields were up 29 basis points at 3.62 percent, while the Italian equivalent was 26 bps higher at 3.35 percent. Five-year Spanish government bond yields were up 9 bps at 5.60 percent, while the Italian equivalent rose 13 bps to 5.02 percent.

ECB President Mario Draghi has outlined a plan to buy debt in cooperation with the euro zone bailout funds - but not before September - and only if countries ask to use the funds and accept strict supervision. The time-gap could leave the market vulnerable to volatile trading.

"People are just locking in a profit," one trader said.