LONDON: Portugal is among a raft of euro zone governments issuing new debt on Tuesday, as bond yields across the region sink on expectations the European Central Bank will loosen policy soon.
Top ECB policymakers have signalled that sovereign bond-buying - known as quantitative easing - could be announced next week, at the bank's first policy meeting of 2015, despite pending elections in Greece.
Traders polled by Reuters on Monday said QE was now a given, a conviction reflected in frantic demand for euro zone debt that has pushed yields to historical lows.
Countries like Portugal are responding by issuing new long-dated debt, easing any funding pressure in years ahead. Besides a 10-year bond, Portugal plans to price its first 30-year bond since 2006 and only its second ever.
"They are jumping on this QE hype to try and sell bonds in some of the most difficult maturities. It needs a very favourable backdrop for something like this," said David Schnautz, interest rate strategist at Commerzbank.
The Netherlands, Austria and Germany are also issuing new debt. Italy is auctioning three-, seven- and 15-year bonds.
Analysts say the Italian Treasury's decision not to tap its existing 30-year bond at auction signals that it also plans to offer a new 30-year bond soon.
Commerzbank's Schnautz said Spain is rumoured to be preparing a new 10-year bond before the ECB meets next Thursday, on Jan. 22, despite auctions this week and last.
In secondary markets, Portugal, Italian and Spanish 10-year yields opened 4 basis points lower at 2.57 percent , 1.77 percent and 1.61 percent . Yields on all other euro zone benchmarks were down 1 to 2 bps except for Greek yields, which edged higher.
ECB governing council member Ewald Nowotny said late Monday that the bank should not wait too long to take action to spur growth and inflation. That action, including bond purchases, was still being discussed, he said.
Benoit Coeure, who sits on the six-member Executive Board, said it was ready to take a decision on QE at its meeting next week and would not be influenced by Greek elections scheduled for Jan. 25.
The elections look set to put the anti-austerity Syriza party into power. That would put Greece on a collision course with its creditors and has raised fears it may exit the euro zone.
Comments
Comments are closed for this article.