Spanish bonds extend their rally after Thursday's auction, with the 10-year yield falling below 6.5%. The move is mainly driven by optimism that upcoming EU summits will see some progress on new measures to take the heat off Spanish and Italian debt, whether in the form of bond buying by the euro zone's bailout funds, or proposals for mutually backed euro-zone bonds, a trader says. The secondary market has seen plenty of short-covering while the well-covered auction was down to Spanish demand, with no sign of the ECB intervening. "It's still only domestics that are buying," the trader adds. Spanish 10-year yields are down 25bps at 6.48%.
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