* Markets more confident Greece will receive aid cash
* Spain sells more than planned at debt auction; yields fall
* Greek yields hit post-restructuring lows
By Marius Zaharia
LONDON, Nov 22 Spain's bond yields dropped on
Thursday after the country raised more money than planned in a
debt auction, helped by expectations of European Central Bank
support and bets Greece will secure fresh aid funds.
Spain received strong bids for its three-, five- and
nine-year bonds and raised 3.88 billion euros. Having already
met its 2012 funding target, the proceeds of Thursday's sale
kicked off its 2013 campaign -- a quest Madrid is likely to find
difficult to complete without outside help.
Markets expect Spain will eventually request aid, enabling
the ECB to buy its short-term bonds.
"It's a clear reflection that sentiment in Spain has
improved markedly," RIA Capital Markets bond strategist Nick
"They are already funded for 2012 and the market is betting
that Spain will ask for a bailout early next year when they face
a (wall of issuance). On top of that markets seem pretty
sanguine about Greece and they think somehow, by hook or by
crook ... they're going to get their money."
German Chancellor Angela Merkel said on Wednesday an
agreement to release aid to Athens was possible next Monday when
euro ministers meet on Monday. Greece's international lenders
failed to reach a deal earlier this week.
Ten-year Spanish yields were 7 basis points
lower on the day at 5.66 percent, having traded above 6 percent
at the start of the week.
Expectations that Greece will soon get more cash set Greek
yields on course for their 10th consecutive daily fall. The
February 2023 bond yield dropped to 16.164
percent, its lowest since it was issued as part of a debt
restructuring in March.
Rabobank rate strategist Lyn Graham-Taylor said the market
was also betting Greece might secure easier bailout terms, such
as lower interest rates or the inclusion of debt buybacks funded
by the euro zone rescue fund.
Euro zone paymaster Germany has said such options could
bridge the funding gap over which the deal foundered on
"If that happened, it could be positive for Irish and
Portuguese yields as well," Graham-Taylor said.
Merrion Stockbrokers chief economist Alan McQuaid said
Merkel's comments would lead to further gains for fringe euro
zone bonds in the near term and said his firm would be buying
such paper and selling higher-rated bonds in the coming days.
He expected Spain to ask for help possibly as early as next
week once elections in the wealthy Catalonia region over the
weekend are out of the way.
"I expect Greece will get a deal next Monday given Merkel's
comments and ... Spain might start looking for a bailout next
week," McQuaid said, adding that a post-bailout rally could
"easily" take 10-year Spanish yields below 5 percent.
German Bund futures were five ticks lower at
142.12, having fallen 83 ticks in the previous two sessions.
Charts pointed to further losses for Bunds in the near future as
they broke below their 100-day moving average at 142.34.
UBS technical analyst Richard Adcock recommended investors
bet on a fall towards 141.50, just above the mid-point of the
German 10-year yields were a tad higher at
1.438 percent, with Commerzbank strategists expecting them to
rise towards 1.50 percent in coming days.