(Corrects headline and first paragraph to debt buyback instead
By Emelia Sithole-Matarise
LONDON Dec 9 Italian bond yields fell on
Monday, outperforming euro zone peers a day before a debt
buyback aimed at easing the country's 2015 and 2017 repayment
Perkier demand for risk assets after upbeat Chinese export
data at the weekend also underpinned demand for lower-rated euro
The Italian Treasury will buy back on Tuesday floating rate
notes (CCTs) maturing in Dec. 2014 and Sept. 2015, fixed rate
bonds maturing in March 2015 and April 2015 and bonds linked to
euro zone inflation maturing in Sept. 2017.
This follows a bond exchange three weeks ago where it
successfully swapped 2015 and 2017 paper for 2018 bonds to
help ease near-term debt repayments.
Italian bonds also benefited from reduced supply pressure
after Rome cancelled its mid-month bond auction, having
completed its 2013 funding thanks to a record retail-targeted
bond sale last month.
"The treasury is planning to reduce the cliff of redemptions
for 2014 and 2015 with longer maturities so that's positive news
for Italy and that could be another driver for tightening of
spreads," said ING strategist Alessandro Giansanti.
"I think the treasury will offer some good pricing and there
will be a good opportunity for investors to give back the bond
and extend on the curve to move to five years, where there's
Italian 10-year yields were last 4 basis
points lower at 4.16 percent with Spanish equivalents trading at
the same level, down 3 basis points.
Waning fears of an Italian government collapse, after Prime
Minister Enrico Letta survived a confidence vote last month and
former premier Silvio Berlusconi was expelled from parliament,
also supported demand for the country's bonds.
Spanish bonds have also fared well since Standard & Poor's
became the second rating agency in less than a month to revise
its outlook on the country's rating to stable from negative.
The yield gap between 10-year Spanish and German bonds is
now near its tightest in five weeks, at around 232 bps.
The firmer tone for riskier assets kept core German Bunds on
the back foot. Bund futures were down 11 ticks on the
day at 140.00 with cash 10-year yields 1 basis
point up at 1.85 percent.
Uncertainty over when the U.S. Federal Reserve might start
scaling back its bond purchases was also keeping investors wary.
Jobs numbers on Friday beat expectations but left some analysts
sceptical that the rise was strong enough to prompt immediate
action from the Fed, which holds its final policy meeting of the
year next week.
"We'll remain nervous until the Fed meeting on 17th and
18th. This week trade will remain patchy and there's just dribs
and drabs of data and also supply in the U.S. which could keep
people cautious," a trader said.
(Editing by Catherine Evans)