Bond yields edge lower

The cost of Irish borrowing dipped today as the yield on 10-year Government bonds fell below 6 per cent.

By 1.33pm, the yield was 5.979 per cent, below the opening level of 6.12 per cent.

Yields on 10-year bonds have edged lower in recent weeks as the Central Bank published its final figure for the cost of the bank bailout, following a high of almost 7 per cent at the end of September.

Minister for Finance Brian Lenihan told investors at the end of September that the National Treasury Management Agency would return to the bond markets "in the normal way" in early 2011. However, the remaining auctions for the rest of the year are being cancelled, due to the high bond yields.

Spain plans to sell 15-year debt this week, taking advantage of a rebound in the euro-region bond market to reduce pressure on its short-term borrowing needs.

The country will auction bonds that mature in July 2025 for the fourth time this year, and also will sell securities on October 21st that are due in July 2032. The extra yield that investors demand to hold 10-year Spanish debt rather than benchmark German bunds declined to 159 basis points as of 12.36pm in London, the lowest in more than two months.

Spanish bonds have added to the biggest quarterly gain since the end of 2008 even as a jobless rate

above 20 per cent crimps economic growth. The government is extending the maturities of its debt after relying on shorter-dated securities to raise funds as pessimism about a possible default roiled the so-called euro peripherals.

Spanish, Portuguese and Greek 10-year bonds rose relative to German bunds last week as the nations' financial institutions reduced their reliance on funding from the European Central Bank, indicating the sovereign debt crisis is easing. Yields on 10-year Greek bonds remain the highest in the euro region, at 8.93 per cent, 655 basis points more than German bunds.

Greece, Portugal, the Netherlands and Spain are selling short-dated debt this week, while France will offer bills, notes and index-linked bonds. Greece isn't currently issuing bonds as it receives financial support from the European Union and International Monetary Fund.

Additional reporting: Bloomberg