Spanish bonds rise on bailout speculation

Spanish government bonds were up for a third day on  speculation euro-area leaders would go for bailout facilities to buy sovereign debt.

Spain's five-year yields were heading for their biggest three-day drop since January with the nation selling more securities than planned at an auction.

Spanish banks need as much as €62 billion  of capital, a private-sector report published today in Madrid said. German bunds, the German government's federal bond, was up for the first time in three days following a report that showed euro-area services and manufacturing contracted for a fifth month in June.

Spain's five-year note yield fell 24 basis points, or 0.24 percentage point, to 5.93 per cent at 4:58 pm London time, reaching 5.85 per cent, the lowest since 12 June.

The yield was down 62 basis points over the past three days, the largest slump since the period through 12 January. The 4.25 per cent security which is to mature October 2016 advanced 0.87, or 8.70 euros per 1,000- euro face amount, to 93.705.

Investors have hiked the premium they charge to lend to Spain and Italy as concerns rise that the two nations would struggle to curb their debt levels.