* Portuguese yields hit lowest since April 2010
* Hunt for yield leads investors to euro zone peripherals
* Details of first post-bailout Irish auction lifts mood
By Joshua Franklin
LONDON, March 10 Portuguese bond yields fell
sharply on Monday to near four-year lows on increasing optimism
the country could follow Ireland out of its international
bailout programme later this year.
Portugal's economy is expected to grow 1.2 percent this year
and last month passed the penultimate review of its fiscal and
economic performance under an EU/IMF bailout.
Lisbon hopes to follow Dublin's example. Ireland formally
left its programme in December, becoming the first euro zone
country to do so.
"In some European circles, they are warming up to the idea
of Portugal trying to do like Ireland, i.e trying to get free
from any support, plan which obviously would be good news for
investors because that implies a lower degree of subordination,"
said Vincent Chaigneau, head of fixed income and forex strategy
at Societe Generale.
Portuguese bond yields fell 12 basis points to 4.48 percent,
their lowest since April 2010.
Adding to the positive sentiment among lower-rated euro zone
members, Ireland's debt agency said it would seek to raise 1
billion euros in an auction of 10-year bonds on Thursday. Dublin
had said in February it would resume regular bond auctions this
Irish yields finished the day almost flat at
3.09, having earlier risen to 3.14 percent as investors made
room on their books for the new bonds.
Investor appetite for higher returns following the European
Central Bank's decision to leave interest rates on hold helped
Spanish and Italian yields lower,
with the former down 5.6 bps at fresh eight-year lows of 3.31
"In such an environment of low rates for longer and low
volatility...having these (periphery) bonds in your portfolio in
order to get some extra yield pick-up is very attractive," said
BNP Paribas rate strategist Ioannis Sokos.
Data showing Italian industrial production rebounded more
than expected in January also helped investor sentiment towards
Italy, whose 10-year yields fell 5.2 bps to 3.37 percent,
equalling Thursday's eight-year lows
Yields on low-risk German Bunds fell by 2.3
bps on the day to 1.63 percent. Traders cited increased concerns
over unrest in Ukraine, where unidentified armed men fired in
the air as they moved into a Ukrainian naval post in Crimea.