OREANDA-NEWS. March 11, 2015. Yields on the debt of nearly all euro zone countries dropped to record lows on Tuesday, a day after the European Central Bank began buying bonds in an effort to revive inflation and economic growth.

Italian, Spanish and Irish yields all reached record lows as peripheral euro zone debt caught up with Monday's rally in core bonds, when Austrian, Dutch, German and Finnish yields fell to record lows.

Traders said national central banks from the euro zone's top-rated countries were more active than those in the periphery in the first two days of quantitative easing, the ECB's 1 trillion-euro bond-buying programme.

Central banks put in orders averaging around 15 million to 20 million euros -- less than half the orders seen during the ECB's first bond-buying programme, at the height of the financial crisis. Smaller, more frequent orders allow smaller trading desks to take part, easing the ECB's job of sourcing the bonds and limiting market volatility, dealers said.

Antonio Torralba, head of flow rates trading at BBVA in Madrid, said the main sellers to the ECB were bank trading desks, which had large amounts of bonds from earlier government debt sales.

"Selling from customers was quiet. We've seen some selling this afternoon from international customers, mainly (from) the U.S.," Torralba said.

He said on Monday central banks bought mainly around the 7-year maturity. On Tuesday, the buying extended to very long-dated bonds.

Thirty-year bonds outperformed shorter-dated maturities across the euro zone. German 30-year yields fell 14 basis points to 0.73 percent, after falling to a record low of 0.709 percent earlier in the day.

The ECB and national central banks of euro zone countries, collectively known as the Eurosystem, intend to buy 60 billions euros a month of mostly government bonds at least until September 2016.

The buying so covers all maturities from two to 30 years and includes inflation-linked bonds, traders and analysts said. That helped Germany sell 1.87 billion euros of a new 2026 linker at a record-low real average yield of -0.89 percent.

Analysts said it was too early to draw conclusions about the pace of buying. The ECB will give a weekly aggregate of amounts purchased every Monday. ( http://link.reuters.com/gak34w )

"The actual flow at the moment is not necessarily representative of what the ECB can do. It has to be judged over time," said Societe Generale rates strategist Ciaran O'Hagan.

Spanish, Italian and Irish 10-year yields fell 5-9 basis points to 1.18 percent, 1.22 percent and 0.76 percent, respectively. Their Austrian, Belgian, Finnish, German and French equivalents fell by a similar amount.

Thirty-year yields fell 12-15 bps across the region. Two-year yields fell only 1-2 bps.

"Investors who had put their faith in the trading adage 'buy the rumour -- sell the fact' got their comeuppance," DZ Bank strategist Hendrik Lodde said.

OUTLIER GREECE

There were concerns, however, that the Bundesbank could struggle to reach its monthly share of asset purchases. Yields on short-dated German paper traded below the ECB's threshold of -20 basis points -- two-year German yields have fallen to -0.24 percent since the ECB outlined its programme last week. Five-year bonds were yielding -12 bps.

"Without good purchases in the short-dated bonds, where outstandings are big, it is difficult to see how the Bundesbank is going to get its share of the programme done," Societe Generale strategists said in a note.

Greece remained the outlier. Yields on its bonds rose by up to 79 bps as relations with its creditors remained testy.

German Finance Minister Wolfgang Schaeuble said on Tuesday Greece would get no aid until international lenders agreed that it had delivered on its reform commitments.

A technical team from Greece will open talks about the reforms this week with experts from the lenders, EU officials said.

Blunt comments from Greek Finance Minister Yanis Varoufakis, who described his country as the most bankrupt in the world, suggesting an agreement was still be a long way off.