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EURO GOVT-Italy, Spain prices rise on easing supply pressure
May 17, 2013 / 8:26 AM / in 5 years

EURO GOVT-Italy, Spain prices rise on easing supply pressure

* 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 (Reuters) - 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 this week.

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 percent, respectively.

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.

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