Peripheral yield spreads widen, low ECB buying seen

LONDON, Dec 10 (BestGrowthStock) – The premium investors demand to
hold peripheral government bonds rather than benchmark German
debt rose on Friday with investors keeping to the sidelines as
European Central Bank bond buying slowed down to a trickle.

“The ECB is only coming in to buy tiny scraps at the moment,
official buying is very limited. They have been in the market in
Portgual and Ireland today buying clips of 10 million across the
curve,” a trader said.

“There’s only one driver that drives spreads tighter and
that is ECB buying and it’s not really there so we just drift
wider.”

ECB bond buying has been the only line of defence against
widening peripheral spreads in the absence of co-ordinated
political action, with traders saying it ramped up the programme
at the end of last week.

The Portuguese/German 10-year bond yield spread
(PT10YT=TWEB: ) (DE10YT=TWEB: ) rose to 342 basis points from around
328 bps at Thursday’s settlement. The equivalent Spanish
(ES10YT=TWEB: ) spread was up at 9 bps at 248 bps.

The cost of insuring government debt from the peripheral
euro zone countries struggling with large debt burdens and
banking sector problems also rose, according to prices from
credit default swap monitor Markit.

(Reporting by William James and Emelia Sithole-Matarise)

Peripheral yield spreads widen, low ECB buying seen