EURO GOVT-Spanish, Portuguese yields edge up, Bunds slip

* Spain sells 2.4 billion euros of 10- and 15-year bonds

* EU summit outcome likely to be “technical”, analyst says

* Bunds slip as upbeat U.S. data weighs on Treasuries

By William James

LONDON, Dec 16 (BestGrowthStock) – Government debt yields for Spain,
Portugal and Italy edged higher on Thursday after bidders
demanded a high premium for their cash from Spain in its final
bond auction of the year.

Spain sold 2.4 billion euros in 10-year and 15-year bonds,
in an auction traders said went smoothly, though the high yield
demanded by bidders conveyed an enduring anxiety about Spain’s
ability to manage its fiscal affairs. [ID:LDE6BF0Q4]

Yields for the countries now at the centre of concern in
Europe’s debt crisis rose on the tender results, but dealers
said there was quickly interest to buy from fund investors.

“Just after the auction, which is quite common for Spanish
auctions, we had a widening of the yield from six to eight basis
points,” said a Paris-based trader at a major investment bank.

“Later, we had some interest coming out of real money guys
in the long end of the Spanish curve.”

March Bund futures (FGBLc1: ) were at their lowest levels of
the day, settling 36 ticks down at 123.87 after upbeat economic
data sent U.S. Treasury prices lower on the day. [ID:nN16373099]

U.S. debt has given subdued euro zone markets direction in
recent sessions, with trading thin going into the year-end, and
low expectations of a market-moving conclusion to an EU leaders
summit taking place over the next two days.

Average yields at the Spanish auction — 5.446 percent for
the 10-year bond — were between 80 and 140 basis points higher
than in previous sales in October and November.

More than 70 percent of bidders in the Spanish auction were
non-resident investors, a source told Reuters. [ID:MDT009591]

Spanish 10-year bond yields (ES10YT=TWEB: ) were 6.3 basis
points higher at 5.5 percent on Wednesday, up more than 20 basis
points this month.

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Graphic on euro zone debt crisis

http://link.reuters.com/nyx95q

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LOW SUMMIT EXPECTATIONS

A two day meeting of European Union leaders starting
Thursday will try to agree on the next steps in tackling a debt
crisis that has seen Greece and Ireland accept international aid
and threatens to spread to Portugal and Spain. [ID:nLDE6BE29I].

“The outcome those invested in the peripherals want to see
would be a massive announcement that supports Europe and the
periphery. Is that likely? No,” said Peter Schaffrik, head of
European rates strategy at RBC Capital Markets.

The summit’s agenda does not leave much room for major
breakthroughs.

EU leaders are planning to sign off on a permanent fund to
stabilise struggling euro zone countries. They are also expected
to make private investors shoulder more of the burden of
spiralling sovereign debt yields by taking haircuts on the bonds
they hold in the event of a restructuring. [ID:nLDE6BE1JV]

The EU meeting was significant to the peripheral debt
markets in the three- to four-year area, where yields would
theoretically ease if a path to stability seemed clear, said
Patrick Jacq, interest rate strategist at BNP Paribas in Paris.

However, he said much of the possible impact of the meeting
had already been priced into the market.

Two-year German bond yields (DE2YT=TWEB: ) were 1.4 basis
points higher at 1.074 percent, with 10-year yields
(DE10YT=TWEB: ) 4 bps higher at 3.07 percent.

(Additional reporting by Kirsten Donovan and Emily Flitter;
editing by Ron Askew)

EURO GOVT-Spanish, Portuguese yields edge up, Bunds slip