Yields of Spanish bonds drops to 3.5-year low amid reduced unemployment rate

January 3
11:56 AM 2014

Spanish bonds were seen advancing in markets, which pushed the 10-year yield to its lowest since May 2010. Speculation that the economy in the Euro Zone gaining momentum has been added by the drop of unemployment figures the most in six months in December as shown in a report.

The additional yield investors have demanded to hold 10-year Spanish debt over German bonds with similar-maturity had dipped below 2 percentage points, which was a first since May 2011. Spain's unemployment have also decreased to 107,570 in December, which was the biggest decline seen since June of last year, Ministry of Labor said in Madrid. The 10-year yield of Italian debt was also seen to have declined to the lowest seen since May 2013. The benchmark 10-year bund yield of Germany, on the other hand, posted around two basis points from the highest level since September last year, said Bloomberg in its report.

London-based Bank of America Corp fixed-income strategist John Wraith said about the bond yields, "It's a sign of belief that the worst is over. Although the data's not great, it's still suggesting that we're not necessarily heading back to any traumatic situation any time soon. These bonds can go on performing for the time being."

The 10-year tield of Spanish bonds decreased eight basis points, or 0.08 of a percentage point to 3.89% as of 12:51PM in London today. The 4.4% bond due in October 2023, on the other hand, climbed 0.635, or €6.35 per €1,000 or $1,365 of face amount, to 104.05.

Wraith also added, "We're not going to go back to the very compressed yields in terms of spreads to the core countries that we saw prior to the crisis. If you go back to pre-2008 these spreads were almost at zero, so we're still a long way away."

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