LONDON Jan 23 Spanish bond yields rose further
above recent eight-year lows on Thursday as investors sold some
of the lower-rated euro zone paper they have been flooded with
since the start of the year.
Traders said some investors had sold portions of the 10
billion euros of new Spanish 10-year bonds issued on Wednesday
as secondary market yields traded below the yield at which the
bonds were placed.
Investors who had not been able to get their hands on as
many of the bonds as they wanted on Wednesday were the main
buyers in the market on Thursday, suggesting Spanish yields were
likely to resume their falling trend.
Spain's sale via a syndicate of banks drew demand of almost
40 billion - a record for European governments.
On the back of an improving euro zone growth outlook, Madrid
has sold larger-than-expected amounts of bonds every week since
the start of the year, completing 16.6 percent of this year's
133.3 billion euros funding target.
This follows strong sales in Ireland, Portugal and Italy,
with Rome due to sell bonds next week as well.
The large amounts of bonds hitting the market may see this
year's strong rally in lower-rated bonds pause for a while,
especially with the amount of debt to be sold exceeding
scheduled repayments in February.
"We've seen a lot of supply but the Spanish deal yesterday
showed there is still a lot of demand out there," said Mathias
van der Jeugt, rate strategist at KBC.
Spanish 10-year yields were less than one
basis point up at 3.75 percent, having risen in the second part
of Wednesday's session after the sale to push further away from
Monday's eight-year low of 3.65 percent.
Yields of other lower-rated bonds were also unchanged or
"People are fairly long of this stuff (peripheral bonds) so
there might be some supply indigestion," one trader said. "But
the Spanish deal had incredible demand so there seem to be
plenty of buyers out there."
German 10-year Bund yields, the euro zone
benchmark, were flat at 1.75 percent.