The world’s largest investors are putting their trust in Greece’s government bond market as record-low yields across Europe compel them to invest in the country that sparked the region’s sovereign debt crisis.
Investors were so concerned about protecting their money from the European debt crisis last month they paid to hold Dutch government notes. An election this week is now raising questions about that status as a shelter.
Ireland’s bonds advanced for a fourth day after Moody’s Investors Service raised the nation’s credit rating back to investment grade, boosting confidence in the securities of the euro area’s most indebted nations.
Government bond sales in the euro region will increase by 1 billion euros ($1.27 billion) to a gross 990 billion euros in 2011 as increased redemptions outweigh improved government finances, ING Groep NV said.
Spanish bonds fell for a second day as the government said it plans to sell inflation-linked securities for the first time, fueling concern increased supply will threaten a rally that pushed yields to record lows.
Spanish and Italian government bonds rallied after a report showed the euro-area economy emerged from a record-long recession in the second quarter, spurring demand for the region’s higher-yielding assets.
Prime Minister Silvio Berlusconi ’s longest-term bonds yield almost as much as Spain’s even though Italy’s deficit is less than half, a sign Europe’s debt crisis has created relative bargains for fixed-income investors.