Italian and Spanish Bond Yields Relax as Greek Deal is Expected This Weekend

“Spanish bonds rose for a second day amid speculation European officials are closing in on an agreement to grant a second bailout to Greece.

Italian bonds also advanced. The European Central Bank will swap its Greek bonds for new ones by Feb. 20, euro-area officials said. The exchange may pave the way for a private- sector debt reduction and convince the region’s finance ministers to agree to provide an aid package when they meet that day in Brussels. Debt from Italy and Spain outperformed benchmark German bunds.

“The market seems to be trying to get itself into a better place in terms of anticipating some good news” on Greece, said Eric Wand, a fixed-income strategist at Lloyds Bank Corporate Markets in London. “The periphery is marginally more positive, Spain is recovering a bit.”

The Spanish 10-year bond yield dropped six basis points, or 0.06 percentage point, to 5.27 percent at 12:35 p.m. London time. The 5.85 percent security due in January 2022 rose 0.445, or 4.45 euros per 1,000-euro ($1,317) face amount, to 104.385. Italy’s 10-year yield declined four basis points to 5.61 percent.

Spain’s 10-year bonds headed for a weekly advance amid increasing confidence that Greece will manage to restructure its debt without triggering contagion to other markets. Finance chiefs will probably approve the rescue package along with a debt exchange designed to cut its obligations, as long as Greece meets conditions for its bailout, three German officials said yesterday.

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