German two-year government notes snapped a three-day advance after Japanese Finance Minister Yoshihiko Noda said his government plans to buy the bonds issued by a European rescue fund, easing demand for the safest assets. The 10-year yield stayed within three basis points of the lowest in more than a month before auctions by Portugal, Spain and Italy this week that will test the appetite for debt from the region’s most indebted nations. Noda said Japan will buy more than 20 percent of the bonds sold by the European Financial Stability Facility to help Ireland. The extra yield investors demand to hold Belgian bonds over German bunds reached a euro- era record as the nation’s government prepared to cut spending. Noda’s comments “weakened bunds slightly, but there remains an underlying bid, as fear remains in the market and there’s no major action from policy makers,” said Peter Chatwell, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. German two-year note yields were little changed at 0.87 percent as of 9:27 a.m. in London. The 1 percent security due December 2012 fell 0.01, or 10 euro cents per 1,000-euro ($1,294) face amount, to 100.245. Ten-year yields were also little changed, at 2.86 percent. Portuguese 10-year yields were little changed at 7.21 percent after dropping 19 basis points yesterday as traders said the European Central Bank bought the debt. Spanish 10-year government bonds declined, pushing the yield up six basis points to 5.63 percent. Equivalent Italian yields were four basis points higher at 4.89 percent, and Irish 10-year yields were little changed at 9.15 percent. Belgian Spread Record The Netherlands sold 3.25 billion euros of 1 percent 2014 notes today at an average yield of 1.297 percent. Greece is scheduled to issue 1.5 billion euros of 182-day bills. Belgian 10-year bonds fell, sending the additional yield investors demand to hold the securities instead of benchmark German bunds to the most since at least 1993, when Bloomberg began collecting the data. The yield spread reached 139.90 basis points, from 135 basis points yesterday, according to Bloomberg generic data. Belgium’s king told caretaker Prime Minister Yves Leterme to draw up a 2011 budget with additional deficit cuts after postponing a meeting with the mediator charged with ending the nation’s 212-day post-election deadlock. Portuguese Yields Portuguese yields may be rising to levels that force the nation to follow Greece and Ireland in requesting a bailout from the European Union and the International Monetary Fund to avert default. The nation plans a 10-year bond sale tomorrow, the first bond auction by any of the euro region’s most indebted countries this year. Its existing 10-year debt has yielded more than 7 percent in 10 of the past 62 days, according to Bloomberg data. Greece needed a rescue within 17 days of its 10-year yield breaching 7 percent on April 6, while Ireland lasted less than a month after it cracked that level in October. “Even if we see a successful auction, it doesn’t mean anything, because at rates above 7 percent it’s not sustainable,” said Ioannis Sokos, a strategist at BNP Paribas SA in London. “It is inevitable that Portugal has to turn to the EU and IMF if they keep borrowing at these levels.” The Spanish Treasury is planning a syndicated debt sale to banks as part of its regular financing program, a Finance Ministry official said. The Treasury hasn’t set the amount or date of the sale, which will not be a private placement, said the official, who declined to be identified, citing ministry policy. To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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