Friday 20 January 2017

Spanish bonds decline after downgrade

Matthew Brown

Published 31/05/2010 | 09:50

Spanish government bonds fell after the Mediterranean nation had its credit grade lowered by Fitch Ratings at the end of last week.

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The decline pushed the yield premium investors demand to hold the country’s 10-year bonds rather than German bunds to the most in more than three weeks.

Fitch downgraded Spain’s credit rating to AA+ from AAA on May 28 after European government bond markets closed.

The country has the euro area’s third-largest budget deficit. French Budget Minister Francois Baroin said that maintaining France’s AAA credit rating is a “tough objective,” Le Figaro reported yesterday, citing a television interview.

“With Spain being downgraded and these stories out of France, there is an ongoing nervousness in European bond markets,” said Michael Rottmann, head of fixed-income strategy at UniCredit SpA in Munich. “We don’t have the chance of spreads tightening from here.”

The yield on Spanish 10-year bonds rose three basis points to 4.28pc as of 8:28am in London.

The 4pc security due April 2020 fell 0.27, or 2.7 euros per 1,000-euro face amount, to €97.81. Spanish two-year yields surged 13 basis points to 2.55pc.

German government bonds were little changed, with the yield on the 10-year bund at 2.68pc.

The difference in yield between Spanish and German 10-year securities widened three basis points to 156 basis points, according to generic data compiled by Bloomberg.

French 10-year bonds were little changed, with the yield at 2.93pc.


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