Irish, Portuguese and Spanish bond yields hit fresh historic lows today and Portugal saw firm demand at an auction in the latest sign of strong investor interest for long-dated euro zone debt.
In contrast to sharp yield falls across most European bond markets, Italian yields rose on concerns over tension within the ruling coalition.
Portugal sold all €1.25 billion of the 10 and 15-year bonds it was offering today, with yields at the auction hitting record lows.
Portuguese 10-year bond yields fell to a record low of 1.07% ahead of the auction and held close to that level afterwards.
Spain’s 10-year bond yield fell to 0.94% – its lowest in more than two years – and Irish long-dated bond yields dropped below 0.5% for the first time since December 2017.
powered by Rubicon Project
The National Treasury Management Agency said today it would sell a new 2050 bond via a syndicate of banks and analysts said the deal was likely to come before the end of the week.
A weak economic backdrop and speculation that the European Central Bank will keep rates at record low levels for longer than anticipated has sparked a stellar rally in fixed income this year.
Sluggish global growth and a dovish tone from central banks have also helped – New Zealand’s central bank today cut interest rates for the first time in two and a half years.
But with yields on higher-rated paper such as 10-year German debt below 0%, which essentially means investors are paying to hold those bonds, investors have moved into lower-rated markets to secure a yield.
That makes a favourable backdrop for this week’s euro zone bond sales, with focus now turning to Ireland.