Italian two-year notes fell, pushing the yield to the highest in a week, and Spanish securities declined after borrowing costs rose at debt auctions.
Spain's bonds dropped a second day after Moody's Investors Service downgraded 28 Spanish banks and Bundesbank President Jens Weidmann said there can be no pooling of issuance in Europe until governments agree to give up their fiscal sovereignty. Italian securities slid as the government said it would sell at least 30 billion euros ($37.5 billion) of new bonds in the third quarter. German bunds fell.
"People still demand a sizable concession to take down these bonds," Jamie Searle, a fixed-income strategist at Citigroup Inc. in London, said before today's auctions.
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The yield on Italian notes due in two years jumped 11 basis points, or 0.11 percentage point, to 4.44 percent at 10:48 a.m. London time, after climbing to 4.73 percent, the most since June 19. The 3 percent security due April 2014 dropped 0.175, or 1.75 euros per 1,000-euro face amount, to 97.66. Similar-maturity Spanish yields were eight basis points higher at 4.94 percent, adding to yesterday's 42-basis point increase.
Italy sold 2.99 billion euros of zero-coupon 2014 debt to yield 4.71 percent, up from 4.04 percent at the previous auction on May 28. The nation also sold 916 million euros of inflation-linked bonds due in 2016 and 2026.
Spain auctioned 3.08 billion euros of bills, exceeding its target of 3 billion euros. The Treasury in Madrid sold three-month debt at an average yield of 2.36 percent, compared with 0.85 percent at the last auction on May 22, and six-month bills at 3.24 percent, versus 1.74 percent last month.
Switzerland auctioned 790.7 million francs ($823 million) of 91-day bills today at a yield of minus 0.849 percent, compared with minus 0.79 percent at a sale on June 19. Today's rate is the lowest since Bloomberg began collecting the data in 2002.
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