Portuguese auction lifts Eurozone sentiment

Government bond yields across the Eurozone inched down yesterday with a successful sale of Portuguese debt boosting sentiment towards peripheral markets.

Italian bond yields, which had risen sharply in early trade, reversed those falls after Portugal sold €1 billion (Dh4.27 billion) of five- and 10-year bonds, exactly the upper limit of the offer.

That sale follows strong demand at a Spanish sale of 15-year inflation-linked bonds on Tuesday that attracted orders of more than €18 billion.

Ten-year bond yields across the Eurozone were down as much as 2-3 basis points, with Italian 10-year bond yields trading at 2.75 per cent — heading back towards six-week lows hit on Tuesday.

Richard McGuire, head of rates at Rabobank in London, attributed early weakness in Italian bonds to a report citing comments from Deputy Prime Minister Luigi Di Maio that the government could face a serious problem if it fails to introduce measures to provide a citizens’ income in the next budget law.

“The positive auction from Portugal has helped sentiment, but the moves have been limited, with markets looking ahead to the ECB meeting,” he said.