“Spanish and Italian bonds advanced as the two nations auctioned a total of 14 billion euros ($18.8 billion) of bills, allaying concern that political turmoil in both countries would damp demand for their debt.
Germany’s benchmark 10-year bund yields were about four basis points from the lowest level in more than two weeks. Italian two-year securities rose, paring a four-week decline sparked by speculation elections this month may fail to deliver a governing majority. Spanish Prime MinisterMariano Rajoy, who faces calls to resign amid contested corruption allegations that he denies, said his People’s Party government last year achieved a significant reduction in Spain’s budget deficit.
“The risky issues have dissipated a bit in Italy and Spain,” said Piet Lammens, head of research at KBC Bank NV in Brussels. “Even if there’s an election result in Italy that’s not the best for markets, we don’t expect it to become a new source of crisis. If there are selloffs, probably there will be investors ready to jump in and buy these assets.”
Spain’s two-year note yield slipped nine basis points, or 0.09 percentage point, to 2.70 percent as of 12:01 p.m. London time. The 2.75 percent security due in March 2015 climbed 0.18, or 1.80 euros per 1,000-euro face amount, to 100.11.
The rate on Italy’s two-year notes fell seven basis points to 1.66 percent. It dropped to 1.275 percent on Jan. 10, the least since April 16, 2010, when it reached a record-low 1.273 percent, according to data compiled by Bloomberg.
