* Brighter economic outlook boosts peripheries
* Greece bucks trend as yields rise on credit gap concerns
* U.S. payrolls above expectations but Bunds flat on the day
By Joshua Franklin
LONDON, March 7 Portuguese bond yields fell to
near-four year lows on Friday as peripheral euro zone debt ended
the week strongly, boosted by increasing confidence in the
bloc's recovery and investors' search for higher returns.
Markit's final Eurozone Composite Purchasing Managers' Index
earlier in the week showed euro zone private businesses enjoyed
their fastest growth rate in over 2-1/2 years last month.
"The news flow is positive," said RBS strategist Harvinder
Sian. "This is a global growth story that's very constructive.
You saw the PMIs come in firmer."
This helped push Portuguese yields 13 basis
points lower to 4.59 percent, the lowest since May 2010.
Bucking the positive trend in the periphery, yields on
10-year Greek junk-rated bonds were up 19 bps at 6.86 percent,
their first rise in four days.
Greece's central bank said on Thursday the country's major
banks must raise an extra 6.4 billion euros ($8.9 billion) in
capital to make themselves strong enough to deal with the
fallout from future crises. Greece's troika of international
lenders estimate the shortfall will be even greater.
Spanish 10-year yields fell 7 bps to 3.37 percent
while equivalent Italian yields were 4 bps down at
Yields on 10-year German Bunds rose as high as 1.68 percent
before ending flat at 1.65 percent, and with top-rated bonds
offering ultra-low returns, market participants see no let-up in
the peripheral rally.
"Not just Germany, but the UK and U.S. markets don't
necessarily offer great risk/reward and so (investors) look to
the kind of yields you can get in Spain and Italy," said Andy
Chaytor, head of European rate strategy at Nomura. "You're still
getting mid-3 percent and that's pretty attractive."
Across the Atlantic, U.S. employers added 175,000 jobs to
their payrolls last month after creating 129,000 new positions
in January, the Labor Department said on Friday. Economists
polled by Reuters had expected non-farm payrolls to rise
The upbeat figures helped to ease fears of an abrupt
slowdown in growth in the world's largest economy after
unseasonably cold and snowy winter weather disrupted economic
activity. It also supported the U.S. Federal Reserve's stance of
paring back its monetary stimulus.
The data weighed more on U.S. Treasury bonds, with their
premium over Bunds hitting its highest since mid-2006 of 114
"Is it a game-changer? No not really," said RBS' Sian. "The
point here is that the Fed is steady as she goes."