Spanish bonds outperformed their German equivalents with the extra yield on Spain’s 10-year securities shrinking toward the lowest since April 2011 after the nation sold a record amount of debt through banks.
Treasuries snapped the biggest advance in a month before the Federal Reserve announces a decision today on whether it will slow bond purchases from $85 billion a month at the end of a two-day policy meeting.
The master plan European Central Bank President Mario Draghi presented yesterday may be “meaningless” if it is restricted to buying government debt with maturities of less than a year, said Christoph Rieger, head of interest-rate strategy at Commerzbank AG.
Mario Draghi said the European Central Bank is “ready to act” as rising money-market rates threaten his drive to reassure investors that borrowing costs will stay low. Bond yields extended their gains.
Italy’s five-year notes dropped, pushing yields to the highest level in more than a week, as borrowing costs increased at a sale of 5.9 billion euros ($7.8 billion) of government debt maturing in 2017 and 2022.
The rate banks pay for three-month loans in dollars rose to the highest in almost nine months as Europe’s near-$1 trillion support plan in the wake of Greece’s budget crisis failed to encourage banks to step up lending.
The London interbank offered rate, the benchmark for $360 trillion of securities, may not survive allegations of being corrupted unless it’s based on transactions among banks rather than guesswork about the cost of money.