Spanish Bonds Climb With European Stocks as Ruble Gains

By Nick Gentle and Stephen Kirkland  

Photographer: Nelson Ching/Bloomberg

Employees work at Sulzer AG's factory in Shanghai, China. The Chinese economy is headed... Read More

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Bonds rose, pushing yields to record lows from Spain to Italy, as stocks gained on speculation the European Central Bank will buy government debt to support growth. The ruble extended the longest rally in 14 months and natural gas led commodities lower.
The yield on Spain’s 10-year bond fell three basis points to 1.98 percent at 6:10 a.m. in New York, dropping below 2 percent for the first time. The Stoxx Europe 600 Index advanced 0.4 percent, led by banks, and Standard & Poor’s 500 Index futures increased 0.3 percent. Russia’s currency strengthened for a sixth day. Chinese shares in Hong Kong jumped the most in a year after the central bank unexpectedly cut rates last week. Natural gas fell the most since February, and crude oil
rose before an OPEC meeting this week.
ECB President Mario Draghi said Nov. 21 that policy makers would be willing to widen the scope of purchases should the inflation outlook diminish. That helped to send the average yield on euro-region government debt below 1 percent, the lowest since at least 1994, according to Bank of America Merrill Lynch indexes. A gauge of German business confidence unexpectedly rose for the first time in seven months, a report showed today.

Photographer: Martin Leissl/Bloomberg

Mario Draghi, president of the European Central Bank, speaks at the European Banking... Read More

“Periphery bonds are going to be one of the beneficiaries” of more ECB debt purchases, Patrick Armstrong, chief investment officer at Plurimi Investment Managers in London, said in an interview on Bloomberg Television’s “The Pulse” with Francine Lacqua and Guy Johnson. “The compression will continue.”

Bonds Gain

Italian government bonds rose with their Spanish counterparts, pushing the 10-year yield four basis points lower to 2.18 percent. The rate on similar-maturity Portuguese debt declined four basis points to 2.97 percent.
German bunds were little changed, with the 10-year yield at 0.78 percent, while Treasury 10-year notes yielded 2.33 percent. The U.S. plans to auction $28 billion of two-year debt today.
The Markit iTraxx Europe Index of credit-default swaps insuring investment-grade companies fell two basis points to 59.5 and the high-yield benchmark dropped eight basis points to 340, the lowest since at least Oct. 6, according to data compiled by Bloomberg.
Two shares advanced for every one that declined in the Stoxx 600. A gauge of banks climbed 1.4 percent, extending a 2.7 percent rally on Nov. 21. Banco Santander SA advanced 2.7 percent and Societe Generale SA added 4 percent.

LSE Climbs

London Stock Exchange Group Plc (LSE) rose 2.9 percent and Deutsche Boerse AG advanced 1.5 percent after Citigroup Inc. recommended buying shares of the bourse operators. Raiffeisen Bank International AG jumped 2.8 percent after ING Groep NV raised its stock rating to buy from hold.
Friends Life Group Ltd. rallied 4.8 percent after Aviva Plc said it’s in talks to buy the company. Aviva, Britain’s second-biggest insurer, declined 5.1 percent. Petrofac Ltd. (PFC) tumbled 24 percent after saying annual profit will be on the low end of its forecast range.
S&P 500 futures gained after the index rallied for a fifth week, closing at a record.
The MSCI Emerging Markets Index advanced for a fifth day, jumping 0.9 percent. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong rose 3.8 percent and the Shanghai Composite Index gained 1.9 percent.
China cut benchmark interest rates for the first time since July 2012 on Nov. 21, placing the nation’s central bank on the side of the ECB and Bank of Japan in deploying fresh stimulus.

Yields Slide

The yield on Chinese government bonds due September 2024 fell 17 basis points to 3.53 percent in Shanghai, according to prices from the National Interbank Funding Center. That’s the biggest drop for a benchmark 10-year yield since October 2008, a ChinaBond index shows.
The ruble climbed 2 percent, taking the six-day advance to 5.2 percent as companies converted foreign-currency earnings to make tax payments. The gains trimmed this year’s decline to 27 percent, the worst-performing currency after Ukraine’s hryvnia.
For the second week running, hedge funds and other speculators pared bets the ruble will weaken versus the dollar, with net short positions cut to 3,599 on Nov. 18, according to the Commodity Futures Trading Commission.
The yen weakened against all of its 16 major counterparts, falling 0.4 percent to 118.25 per dollar. The euro was little changed at $1.2406.
Natural gas futures dropped as much as 6.1 percent, the most since Feb. 27, to $4.006 per million British thermal units in electronic trading on the New York Mercantile Exchange. Total volume traded was almost five times more than the 100-day average. Gas slid 5 percent on Nov. 21 amid speculation that warmer weather would curb heating demand following last week’s Arctic blast.

OPEC Meeting

In London, natural gas rose as much as 2.4 percent to the highest since March 19.
Brent crude oil gained 0.3 percent to $80.56 a barrel in London and West Texas Intermediate crude added 0.4 percent to $76.81 a barrel. Members of the Organization of Petroleum Exporting Countries will meet in Vienna on Nov. 27 to decide on production after oil plunged about 30 percent since June.
Gold for immediate delivery fell 0.4 percent to $1,196.39 an ounce in London trading. Tin led industrial metals lower, retreating 0.8 percent to $20,410 a metric ton on the London Metal Exchange.