“Spanish notes led losses in European sovereign debt markets after demand fell and borrowing costs rose in the nation’s first auctions since announcing that public debt will surge to a record this year.
The declines pushed the yield on Spanish five-year notes to the highest in 12 weeks, while similar-maturity Italian debt slid and Greek 10-year bonds fell. Benchmark German bunds erased an intraday drop as the nation sold securities due in February 2017. The European Central Bank will leave its main refinancing rate at a record low 1 percent today, according to all 57 economists in a Bloomberg survey.
“The auction reflects market disappointment with recent fiscal policy” in Spain, Luca Jellinek, head of European interest-rate strategy at Credit Agricole Corporate & Investment Bank in London, wrote in an e-mailed report. “The immediate post-auction price action is bearish. This kind of price action in the periphery is clearly supportive for German bunds.”
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