Spain’s government bonds rose, with 10-year yields dropping the most in seven months, amid speculation the European Central Bank will accelerate efforts to ease the region’s sovereign debt crisis.
Italy’s securities also rallied after German Chancellor Angela Merkel and French President Francois Hollande pledged to do everything to keep the 17-nation currency bloc intact, echoing comments the day before from ECB President Mario Draghi. Germany’s bunds declined after Moody’s Investors Service cut the outlook on the nation’s Aaa rating, citing concern the country will have to support weaker euro-region members. The ECB meets to review monetary policy on Aug. 2.
“A lot of it is down to Mr. Draghi’s comments, which convinced the market that come next Thursday the ECB will be providing us with some support†for bonds, said Eric Wand, a fixed-income strategist at Lloyds Banking Group Plc in London. “The language he used was pretty forceful. If he fails to deliver on that promise the market is going to make them pay and big time.â€
Spain’s 10-year yield fell 52 basis points, or 0.52 percentage point, this week to 6.74 percent at 5 p.m. London time yesterday, the biggest weekly drop since the period ended Dec. 2. The 5.85 percent bond due in January 2012 gained 3.38, or 33.80 euros per 1,000-euro ($1,237) face amount, to 93.83.
The Italian 10-year bond yield declined 21 basis points this week to 5.96 percent after rising to 6.71 percent on July 25, the highest level since Jan. 16.
