Spain, Italy debt yields hit record lows as QE details eyed

LONDON: Spanish, Italian and Portuguese government bond yields hit fresh record lows on Monday with investors in buoyant mood before the start of the European Central Bank's monthly securities buying programme.

The ECB is expected to give details at its policy meeting on Thursday on how it will roll out the monthly 60-billion euro quantitative easing programme aimed at reviving inflation and the euro zone economy.

Spanish and Italian 10-year yields fell 4 basis points to all-time lows of 1.234 percent and 1.30 percent respectively. Portuguese equivalents were down 4 bps, back at a record trough of 1.799 percent, while Irish equivalents held steady at their all-time low of 0.856 percent.

"Some people were looking at bond buying to start as early as today but the odds are more for the ECB to fine-tune the remaining operational details on Thursday with the purchases probably starting next Monday," Commerzbank strategist Rainer Guntermann said.

"A lot is probably anticipated by the market by now and this is ensuring this very favourable environment for all spread products, notably the peripheral market where (yield) spreads (over benchmark German Bunds) are lower."

Italian and Spanish 10-year yield premiums over Bunds have fallen below 100 bps, their least in almost five years, as investors snapped up peripheral euro zone bonds as yields on top-rated bonds vanished. Yields on German bonds up to seven-year maturity have tumbled into negative territory.

Expectations that euro zone inflation data due later in the day may not be as bad as previously thought nudged German 10-year yields up 1 basis point to 0.34 percent, off a record low of 0.285 percent hit last week. Reports on Friday showed disinflation slowing in some parts of the bloc.

Greek bond yields bucked the downward trend as Athens stayed under pressure to implement some reforms to secure the release of part of aid payments before it runs out of money by the middle or end of March.

Jeroen Dijsselbloem, the head of the euro zone finance ministers' group, told the Financial Times that Greece's international creditors could pay part of the 7.2 billion euro remaining in its bailout pot as early as this month, if Athens starts implementing some agreed reforms.