REFILE-Spanish, Italian bonds brace for syndicated sales
By Ana Nicolaci da Costa
LONDON Oct 9 (Reuters) - Italian bonds recovered from an early dip on Wednesday after orders for a planned syndicated bond issue jumped to 6.5 billion euros from an initial 3.5 billion euros.
Spain is also set to raise funds via a syndicate of banks with the planned long 31-year duration of the paper the latest sign that sentiment toward many of the euro zone's debt-ridden southern economies is improving.
Pricing for both papers is expected later.
"There are price concessions weighing on the curve there," Rainer Guntermann, strategist at Commerzbank said. "This may last a little further into the (supply) but once this is out of the way there is probably also scope for a bit of a recovery."
Concerns over the U.S. government's ability to raise a debt ceiling by its Oct. 17 deadline and avoid default was underpinning safe-haven German bonds at the expense of riskier assets, analysts said, while keeping trade rangebound.
Ten-year Italian yields were little changed at 4.36 percent. Ten-year Spanish yields were up 2.6 basis points at 4.33 pct.
"There is a bit of supply concession in them but we think the deals will go very well and therefore they will perform okay over the course of the day," one trader said.
Global equity markets fell overnight after little progress was made on the U.S. budget deadlock, with U.S. President Barack Obama saying he would be willing to negotiate only after Republicans agree to re-open the government and raise the debt limit with no conditions.
Markets were still optimistic of a last-minute solution, Guntermann said, but the stand-off was too tricky to trade and he expected investors to remain cautious.
German Bund futures were up 22 ticks on the day at 140.44, well within a trading range held in October.
Germany aims to sell 4 billion euros of five-year bonds later. It is benefitting both from its safe-haven status amid the U.S. nerves and from expectations that U.S. monetary policy will stay loose for longer than previously expected.
The U.S. budget deadlock has raised expectations that the Fed may delay any scaling back in its bond-buying program. Obama is also now set to nominate Fed number two Janet Yellen as Fed chairman and she is expected to tread carefully in winding down economic stimulus.
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