* Portuguese yields rise to highest since Feb 2016
* Markets anticipate syndicated-Portuguese bond sale in Jan
* Hefty month of supply puts upward pressure on yields
* Bund yields fall in late trade as US Treasury yields fall
By Dhara Ranasinghe and John Geddie
LONDON, Jan 5 Spanish and Portuguese borrowing
costs rose on Thursday, as bond sales from France and Spain
turned investors' attention to hefty supply in the region this
Spain's 10-year bond yield rose to a three-week high after
the country auctioned 4.1 billion euros of bonds. France sold
about 9.5 billion euros ($9.97 billion) of long-dated debt on
In a volatile day of trade, yields were also pushed around
by competing factors: the minutes of the last U.S. Federal
Reserve meeting that struck a more uncertain tone than expected,
supply, inflation worries and a fall in U.S. bond yields.
But the biggest moves came in the euro zone's periphery,
where analysts said investors were positioning for a month of
Portugal's 10-year bond yield soared 14 basis points to 4.08
percent, its highest level in almost a year, as
investors speculated that the country would probably also sell
bonds via a syndicate of banks in January -- typically one of
the busiest months for debt supply in the region.
"There are pre-supply concessions ahead of an anticipated
syndicated bond issue in Portugal," said DZ Bank strategist
Christian Lenk. "If you look at the past two years, we have seen
a bond issue in the first half of January so it is a well-known
Spain's 10-year bond yield rose as much as 10 bps to 1.54
percent -- its highest in three weeks.
French and Italian counterparts also hit three-week highs
and Germany's benchmark 10-year Bund
yield briefly rose to 0.3 percent, its highest in
a little more than two weeks.
But by late trade most euro zone bond yields had trimmed
their rises or, as in the case of Germany and France, moved back
down as U.S. Treasury yields fell.
Both U.S. and euro zone bond markets drew some comfort from
the minutes of the Dec. 13-14 meeting of Fed policymakers,
released late on Wednesday.
The minutes cast some doubt on the pace of interest rate
rises in the world's largest economy, which will have a knock-on
affect on the euro zone.
They showed that policymakers were considering faster rate
increases, assuming economic growth accelerates because of
fiscal stimulus under President-elect Donald Trump.
But they also spelled out downside risks that could limit
economic growth, such as trade barriers, the dollar's
appreciation and uncertainty on fiscal measures.
"'Wait and see' remains the best way to describe the Fed's
attitude, but the minutes show it is getting concerned that a
hotter economy may warrant a less gradual hiking path," said
Mizuho's head of euro rates strategy, Peter Chatwell.
(Editing by Larry King)