Friday, 2 August 2013

Italian Bonds Rise After U.S. Jobs Data; German Bunds Erase Drop

By Lukanyo Mnyanda & Lucy Meakin - Aug 2, 2013 8:16 PM GMT+0400
Italy’s bonds rose, extending a third weekly gain, as a U.S. report showing employers added fewer workers last month than economists forecast fueled bets central banks around the world will keep policy accommodative.
The nation’s 10-year yield fell to a six-week low after the country’s highest court said yesterday that former Prime Minister Silvio Berlusconi’s ban from holding office must be reviewed by a lower court. German bonds erased an earlier decline after U.S. payroll data revived demand for the region’s safest securities. The extra yield investors get to hold Italian 10-year bonds over German ones narrowed for a second day.
Aug. 1 (Bloomberg) -- European Central Bank President Mario Draghi speaks at a news conference in Frankfurt about credit conditions, forward guidance and the economy after policy makers kept the main refinancing rate unchanged at 0.5 percent. (Source: European Central Bank)
Aug. 1 (Bloomberg) -- European Central Bank President Mario Draghi talks about the decision to leave the benchmark interest rate at 0.5 percent, forward guidance and the euro-zone economy. Draghi, speaking in Frankfurt at his monthly news conference, also discusses inflation expectations. (Excerpts. Source: Bloomberg)
Aug. 1 (Bloomberg) -- European Central Bank President Mario Draghi speaks at a news conference in Frankfurt about the decision to keep its benchmark interest rate at a record low of 0.5 percent for a third month. (This is Draghi's statement only. Source: European Central Bank)
“The environment in general is supportive for peripheral bonds,” said Christian Lenk, a fixed-income analyst at DZ Bank AG in Frankfurt. “The yield tightening is most expressed for Italian bonds. Now we have had the Berlusconi trial. We have seen a verdict and investors seem to take this news with some relief.”
Italy’s 10-year yield fell 11 basis points, or 0.11 percentage point, to 4.25 percent at 5:02 p.m. London time, the lowest since June 19. That increased its weekly decline to 15 basis points. The 4.5 percent bond due in May 2023 rose 0.86, or 8.60 euros per 1,000-euro ($1,327) face amount, to 102.29.
The extra yield investors demand to hold the securities instead of similar-maturity bunds contracted nine basis points to 260 basis points, the narrowest since June 20.
European Central Bank President Mario Draghi said after a policy meeting yesterday that interest rates will stay low for the foreseeable future.

‘Extended Period’

Officials expect “key ECB interest rates to remain at present or lower levels for an extended period of time,” Draghi said at a press conference in Frankfurt, even as he acknowledged that some indicators “tentatively confirm the expectation of a stabilization in economic activity.”
Italian bonds returned 3.3 percent this year through yesterday, according to Bloomberg World Bond Indexes. Spain’s securities rose 6.5 percent, while German bonds lost 1.3 percent, the gauges show.
Berlusconi’s conviction for tax fraud was upheld late yesterday by Italy’s top court, setting up a Senate showdown over his potential expulsion from parliament. The upper house’s committee for immunities is required to vote on whether to strip Berlusconi, a three-time premier and now a senator, of his seat.
Berlusconi’s People of Liberty party will continue to support the government, Nitto Palma, a member of the party in the Senate, said in a statement.

U.S. Payrolls

Spain’s 10-year bond yield declined six basis points to 4.57 percent.
The 162,000 increase in U.S. payrolls in July was the smallest in four months and followed a revised 188,000 increase in June that was less than initially estimated, the Labor Department said in Washington. The median forecast of economists surveyed by Bloomberg was for a 185,000 gain.
Germany’s 10-year yield was little changed at 1.65 percent after rising as much as seven basis points.
Bunds dropped earlier after a euro-area report showed producer prices increased in June from a year earlier, damping demand for safer assets.
Producer prices in the 17-nation euro area rose 0.3 percent after a 0.2 percent annual drop in May, the European Union’s statistics office in Luxembourg said.
To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at; Lucy Meakin in London at
To contact the editor responsible for this story: Paul Dobson at