LISBON: Portuguese bonds led a decline in the debt of Europe’s lower-rated nations, underperforming their German counterparts for the first time in five days as a slump in stocks reduced demand for higher-yielding assets.
Spanish securities also fell amid the political turmoil facing the country. The bonds of the euro zone’s so-called peripheral members had been rallying since the European Central Bank expanded its record stimulus program on March 10, returning 0.7 percent from then through Monday, compared with a 0.2 percent loss in German debt, Bank of America Merrill Lynch bond indexes show.
“There’s an element of risk-off that would likely have resulted in some profit-taking following the strong post-ECB performance of Spanish and Portuguese bonds,” said Orlando Green, a rates strategist at Credit Agricole SA’s corporate and investment-banking unit in London. “And for both countries, there are some domestic fundamental drawbacks, namely politics. That said, we see the decline today as a respite rather than a reversal of the previous days’ move.”
Portugal’s 10-year bond yield rose eight basis points, or 0.08 percentage point, to 3.01 percent as of 11:12 a.m. London time, having declined 24 basis points in the previous four days. The 2.875 percent security due in July 2026 fell 0.72, or 7.20 euros per 1,000-euro ($1,108) face amount, to 98.815.
The extra yield, or spread, that the bonds offer over similar-maturity German debt widened to 2.73 percentage points, from a six-week low of 2.65 percentage points on Monday. The 10-year Spanish bond yield climbed five basis points to 1.52 percent, after falling for the previous two days. The equivalent German bund yield was little changed at 0.28 percent.
