Europe's higher-yield­ing bonds ben­e­fit as ECB pre­pares QE boost

The Pak Banker - - MARKETS/SPORTS -

Gov­ern­ment bonds across the euro zone rose as the Euro­pean Cen­tral Bank pre­pared to in­crease its debt pur­chases and in­vestors awaited eco­nomic re­ports that are likely to show of­fi­cials are still far from achiev­ing their pol­icy ob­jec­tives.

Span­ish 10-year debt yields fell the most in more than a week be­fore a re­port Thurs­day that will show an­nual in­fla­tion in the coun­try slowed for an eighth month in March, ac­cord­ing to econ­o­mists sur­veyed by Bloomberg. Sim­i­lar-ma­tu­rity Ger­man bunds, the re­gion's bench­mark gov­ern­ment se­cu­ri­ties, rose for a fourth day in their long­est win­ning stretch since Jan­uary, though they lagged their high­eryield­ing peers.

"There's still more room to go," said Jan Von Gerich, chief strate­gist at Nordea Bank AB in Helsinki. "Across the board, we're go­ing to see more spread nar­row­ing." Euro-area debt has out­per­formed U.S. Trea­suries this month be­fore the ECB in­creases monthly bond pur­chases to 80 bil­lion euros ($89 bil­lion) from 60 bil­lion euros on April 1. But with quan­ti­ta­tive eas­ing now a year old, the pro­gram is strug­gling to have much of an ef­fect on the econ­omy. A re­port due on the same day as the Span­ish data is forecast to show euro-zone prices fell, leav­ing in­fla­tion far short of the close to 2 per­cent rate aimed at by pol­icy mak­ers.

Yields on Spain's 10-year bonds de­clined seven ba­sis points, or 0.07 per­cent­age point, to 1.46 per­cent at 10:03 a.m. Lon­don time, set for the big­gest daily drop since March 17. The 1.95 per­cent se­cu­rity due in April 2026 climbed 0.62, or 6.20 euros per 1,000-euro face amount, to 104.575. Dutch and Ir­ish gov­ern­ment bonds will be sup­ported be­cause of lower is­suance than last year, while Por­tuguese se­cu­ri­ties are at­trac­tive be­cause of the yield pick-up they of­fer over bench­mark debt, Von Gerich said.

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