“Spanish and Italian notes rose after European Central Bank President Mario Draghi was said to tell officials he would be comfortable buying three-year securities to lower borrowing costs for nations in financial distress.
Yields on Spanish and Italian two-year debt fell to the least ever relative to 10-year bonds amid speculation the central bank’s action will provide only temporary respite, buying the nations time to plug their deficits. German 10-year bunds fell for a third day, pushing the yields up to the most in more than a week as demand for the safest assets waned. Austria sold bonds maturing in 2017 and 2019, while Greece’s securities advanced as it auctioned bills.
“We can expect the short end to perform pretty well, the comment that the ECB can go up to three years was positive news,” said Allan von Mehren, chief analyst at Danske Bank A/S (DANSKE) in Copenhagen. “There’s still a lot of uncertainty about the whole underlying structure of the project and that’s going to make it difficult for yields in the longer end to come down significantly.”
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