Spanish Bond Sale Successful as Yields Shoot Up 20%

Arthi Gupta
16 Dec, 2010
New York City

The European indexes fell ahead of the EU leaders meeting in Brussels. Spain sold

[R]4:00 PM Frankfurt – The European indexes fell ahead of the EU leaders meeting in Brussels. Spain sold €2.401 billion of long-term government bonds. Euro area inflation remained flat in November. German private sector output improved and French private sector growth slowed in December. Swiss National Bank held key rate.[/R]

U.S. stocks traded sideways after mixed economic data and Asian markets fell.

Spain sold €2.401 billion of long-term government bonds on Thursday. The average yield on the 10-year paper rose 18% to 5.446%, from 4.615% at the previous auction. The average yield on the 15-year bond surged 31% to 5.953%, from 4.541% at its previous auction.

Yesterday, ratings agency Moody’s placed Spain’s Aa1 credit rating on review for a possible cut citing the country’s deteriorating fiscal position.

The Basel Committee issued details of Basel III global regulatory standards and results of its quantitative impact study. The study, comprising 263 banks from 23 committee member jurisdictions, found that Group 1 banks in aggregate would have had a shortfall of €577 billion at the end of 2009, while Group 2 banks would have required an additional €25 billion.

Investors in Central and Eastern Europe remained downbeat on their future business conditions, according to survey results released by the Centre for European Economic Research (ZEW).

The ZEW-Erste Group Bank CEE Indicator dropped 8.7 points from November to 22.7 in December, reflecting more cautious economic expectations on a six-month time horizon for the region, including Turkey.

In Paris CAC 40 Index declined 12.69 or 0.33% to close at 3,867.50 and in Frankfurt DAX Index edged lower 10.28 or 0.15% to close at 7006.09.

Euro Area Private Sector Growth Eases, Inflation Flat

Euro-zone private sector growth slowed in December with the flash composite output index falling to a two-month low of 55 in December from 55.5 in November, a preliminary report from Markit Economics showed.

The flash manufacturing purchasing managers'' index climbed to an eight-month high of 56.8 in December from 55.3 in November.

Euro-zone annual inflation remained at 1.9% in November, final data from the European Union statistics office Eurostat showed. Excluding volatile energy, food, alcohol and tobacco prices, core annual inflation remained at 1.1% in November.

Hourly labor costs in the euro area rose 0.8% annually in the third quarter following 1.6% rise in the second quarter, according to figures released by Eurostat.

In the EU27, the annual rise in the hourly labor costs was 1.2% up to the third quarter of 2010, compared with the revised 1.5% for the previous quarter.

German Private Sector Activity Improves

Germany''s private sector output expanded strongly in December, Markit Economics said. The flash composite output index rose to 59.7 in December from 59 in November.

The Purchasing Managers'' Index for manufacturing rose to 60.9 in December from 58.1 in November. However, the services PMI fell to 58.3 in December from 59.2 in t November.

French Private Sector Growth Slows

French private sector expansion slowed in December with the headline composite output index falling to a two-month low of 55.3 in December from 56.4 in November, according to flash estimates by Markit Economics.

The flash manufacturing purchasing managers'' index dropped to a two month low of 56.3 in December from 57.9 in November and the manufacturing output index declined to 58.1 in December from 59.5 in November.

Swiss National Bank Holds Rates

The Swiss central bank left its key interest rate unchanged at 0.25%, citing heightened uncertainty in financial markets and contained inflationary pressures.

The bank said the Swiss economy was forecast to slow to 1.5% in 2011, following growth of about 2.5% this year.

Gainers & Losers

ArcelorMittal S.A. fell 2.18% to €27.585 after the steel giant stated that its board of directors decided to continue with the spin-off of the company''s stainless steel business to be named Aperam. The company also announced the introduction of an initiative for $250 million profit improvement in the unit over the next two years.

Elan Corporation, plc gained 0.23% to €4.37 after the neuroscience-based biotechnology company said it finalized the agreement-in-principle with the U.S. Attorney''s Office for the District of Massachusetts to resolve all aspects of the U.S. Department of Justice''s investigation of sales and marketing practices for Zonegran, an antiepileptic prescription medicine that Elan divested in 2004.

Rio Tinto Plc declined 0.76% to 4,396.50 pence after the miner announced the pricing for a secondary public offering of 25.6 million shares of Cloud Peak Energy, a recent spin-off of Rio Tinto Energy America.

SAP AG dropped 1% to $49.26 after the German software company said it plans to buy disclosure management solutions business from Germany-based cundus AG, which the software major expects will strengthen its finance solutions portfolio.

Vontobel Holding AG edged lower 1.02% to Sfr34.00 after the Swiss private bank named Zeno Staub its new chief executive, effective May 4, 2011.

Meyer Burger Technology AG rose 0.87% to Sfr29.15 after the Switzerland-based holding company said it bagged a contract worth over Sfr55 million from a customer in Asia.