* Spanish, Italian bond yields rise as supply looms
* Spanish yields may have reached a floor - analyst
* German Bunds rise after Bernanke comments
By Marius Zaharia
LONDON, Jan 15 Spanish and Italian bond yields
rose on Tuesday, weighed down by the prospect of heavy bond
sales, leading some analysts to question whether a rally in
peripheral euro zone debt had gone too far.
At the other end of the euro zone credit spectrum, German
Bund prices rose after Federal Reserve Chairman Ben Bernanke,
speaking on Monday, gave no clear hint on when the U.S. central
bank would tighten its ultra-loose monetary policy.
Italy kicked off a 15-year bond sale by syndication on
Tuesday, and Spain is due to sell up to 10
billion euros in bills and bonds on Tuesday and Thursday,
With Spain only at the beginning of the most challenging
2013 funding programme in the euro zone, some analysts say the
recent rally in peripheral debt may have gone too far and yields
could start rising gradually as supply takes its toll.
"We're seeing a bit of widening in the peripherals driven by
supply factors," Rabobank rate strategist Lyn Graham-Taylor
said. "Spain's next issuance is a really chunky figure ...
There's a realisation of the volumes to be taken down."
"Supply, in our view of the world, will start to increase
pressure on Spain and yields could start rising."
Spain's gross target for bond issuance in 2013 stands at
121.3 billion euros. Last year it issued 97 billion euros worth
of bonds and made private debt sales of 16 billion euros, far
exceeding its original target of 86 billion.
Ten-year Spanish government bond yields were
last 3.7 basis points higher at 5.08 percent, extending this
week's bounce off 10-month lows of 4.86 percent hit on Friday.
With the backstop provided by the European Central Bank's
new bond buying programme -- which could be activated if a
country seeks financial aid from its euro zone partners --
Spanish yields have fallen from close to 8 percent mid-2012.
In Italy, where the Treasury plans to sell its first 15-year
bonds since September 2010, 10-year yields
rose 2.7 basis points to 4.22 percent.
Bund futures rose 31 ticks to 143.08, tracking a
move in U.S. Treasuries. The two assets are perceived as safe
havens and often move in tandem.
The move in Treasuries was sparked by Bernanke's comments.
He painted a cautiously optimistic economic outlook, but gave no
clear hints the Fed would back away from its loose monetary
policy any time soon, despite speculation that it will do so
"Judging from ... (Bernanke's) comments yesterday evening he
remains comfortably in the dovish camp and hence defused some
concerns on the Fed thinking of an early exit later this year,"
Lloyds strategists said in a note.
Traders said Bernanke's stance was surprising only for a
small part of the market -- those investors who bet the U.S.
economy will pick up considerably this year. Therefore, room for
a rise in Bunds was limited.
"He was always going to err in that direction," one trader