* Spain to auction bonds next week after solid syndication
* Spanish, Italian yields could fall back to 2 1/2-year lows
* Bunds steady as central banks seen remaining accommodative
By Emelia Sithole-Matarise
LONDON, May 17 Spanish and Italian bond prices
pushed higher on Friday with more near-term gains expected as
supply pressure eases after solid demand at syndicated sales
Spain is scheduled to sell more bonds next Thursday and
investors may sell Spanish debt before then to make way for the
supply, though such a move was likely to be short-lived.
Both Spain and Italy, which have taken turns at the
forefront of the euro zone debt crisis in the past two years,
have cashed in on investor appetite for higher-yielding assets
this year, spurred by ultra-easy central bank policies.
Rome has raised about 65 percent of this year's expected
issuance of 186 billion euros while Spain has met just over half
its 121 billion euro target, according to Reuters data.
"At the moment both Spain and Italy seem to be on top of
their funding schedule and this is all helping to support the
market," said Philip Tyson, a strategist at ICAP.
"It seems to be an environment where the periphery can do
well and we can see them move back towards their yield lows."
Spanish 10-year yields were 6 basis points
lower on the day at 4.24 percent with Italian equivalents down a
similar amount at 3.92 percent. Earlier this
month, they hit 2-1/2-year lows of 3.95 percent and 3.68
Expectations central bank policy will remain ultra-easy for
months were also supporting demand for low-risk German Bunds.
German Bund futures were steady at 145.31, after
rising to one-week highs on Thursday in the wake of soft U.S.
data on housing, jobs, prices and manufacturing.
The data eased speculation the Federal Reserve might slow
its bond purchase programme. Some Fed officials, however, still
called for the economy to be weaned off stimulus.
"The data is not great so I can't see why they (the Fed)
would be suddenly turning around and tapering off. ... (U.S.)
Treasuries are holding firm so there's no reason for Bunds to
sell off. I think it will be another day of potential
consolidation," a trader said.