LONDON: Long-dated Spanish and Italian bond yields climbed to multi-month highs on Wednesday, as Spain started the sale of a 50-year bond and investors anticipated Italy may soon do the same.
Madrid is set to price a new bond expiring in 2066 later in the day, while Rome has also been sounding out investor demand for such a bond even though its Treasury said on Tuesday that it had no firm plans.
France and Belgium have already taken advantage of record low rates to launch rare 50-year bonds this year, part of a trend which has seen the highest share of long-dated issuance from the bloc's governments in the euro era.
Yields tend to rise in secondary trading ahead of new bond sales as investors make room in their portfolios for the supply.
Spain's benchmark 30-year bond yields rose 11 basis points (bps) to a two-month high of 2.86 percent on Wednesday, while Italy's rose 9 basis points to a three-month high of 2.78 percent.
Their 10-year yields were up 4 bps at 1.62 and 1.50 percent, respectively, erasing most of the falls seen on Tuesday after euro zone finance ministers offered debt relief to Greece, the bloc's weakest link.
"The pressure on the long end of the curve is all about the syndicated 50-year in Spain and the expectation that there could be one in the near future from Italy also," Mizuho strategist Peter Chatwell said.
"Governments should be issuing into the long end of the curve to take advantage of the demand that has materialised and the conditions that ECB policy has helped to create."
Countries are eager to issue longer-dated debt as it allows them to reduce refinancing pressure and boosts investor confidence in their ability to service their obligations.
At the same time, the European Central Bank's loose monetary policy, which includes negative interest rates, has dragged down bond yields and increased demand for long-dated debt from investors desperate for returns.
Some investors are even buying these ultra-long bonds as an insurance against the bloc sinking into a Japan-style decade of deflation.
More than a quarter of bonds issued in the first four months of the year will expire in 12 years or more, the highest share of overall issuance since the euro zone was established in 1999.
Of
other eye-catching deals in the euro area this year, Ireland and Belgium have both privately placed 100-year debt.
Elsewhere in a busy day for euro zone debt issuance on Wednesday, Portugal will tap 1 billion euros of 10-year debt and Germany will sell 5 billion euros of two-year debt.
Comments
Comments are closed for this article.