RTRS: EURO GOVT-Calm in peripheral markets, Bunds up on Egypt
* Portugal debt agency to buy back bonds in reserve auction
* Portuguese yields steady after previous session blowout
* Bunds climb on Egyptian political turmoil
By Nia Williams
LONDON, Feb 11 (Reuters) - Portuguese debt prices held steady on Friday after hitting record highs the previous day while Bund yields moved lower across the curve, fuelled by niggling unease among investors over turmoil in Egypt.
Portugal's IGCP debt agency offered to buy back bonds in a reverse auction next week, in a move analysts said could alleviate some pressure on the country's debt.
"It's a clever move, right now spreads have widened again close to record wides, and there is a window of opportunity to buy back existing debt at a lower price," said Ioannis Sokos, rate strategist at BNP Paribas.
"The benefit is small as the bonds mature in three and five months but it could relieve pressure on the April and June redemptions and make them smoother."
Portugal has to repay around 9 billion euros worth of bonds in the second quarter of 2011. Analysts said the early repurchase could be intended to reassure investors the Treasury is not struggling to fulfill its debt obligations. [ID:nLDE71A0XH]
Don Smith, economist at ICAP said the government was taking the opportunity to use funds raised at a successful bond auction in January and syndicated sale on Monday to help negotiate the upcoming payouts.
"They do not want to be boxed into a corner. The market perception seems to be that this is a process to alleviate the pressure on this very bumpy redemption schedule," he said.
The Portuguese 10-year yield was last down 1.6 basis points on the day at 7.333 percent while the Portuguese/German yield spread was almost unchanged on the day at 404 bps.
Spanish and Italian spreads also remained steady, held in check, traders said, by the perception the European Central Bank was waiting in the wings ready to act if jittery investors trying to dump Portuguese paper sent premiums higher again.
On Thursday traders said the ECB stepped into the market to buy Portuguese bonds and rein in 10-year yields that soared to a euro-lifetime high of 7.656 percent.
