Greece Debt Deeper in Junk; Italian Bond Yield Rises to 4.93%

Arthi Gupta
14 Jul, 2011
New York City

European indexes traded lower after a rating agency downgraded Greece but Italy managed to sell 5-year bond sale at 4.93% yield. Euro-zone annual inflation was stable at 2.7% in June. Lafarge agreed to sell gypsum assets to Belgian Etex for

[R]4:30 PM Frankfurt – European indexes traded lower after a rating agency downgraded Greece but Italy managed to sell 5-year bond sale at 4.93% yield. Euro-zone annual inflation was stable at 2.7% in June. Lafarge agreed to sell gypsum assets to Belgian Etex for €1 billion.[/R]

European indexes declined after Fitch Ratings on Wednesday downgraded Greece's credit ratings by three notches to 'CCC' from its previous rating of 'B+', citing the absence of a new, fully-funded and credible EU-IMF program and heightened uncertainty surrounding the role of private creditors in any future funding as well as the country's weakening macroeconomic outlook.

The new rating was removed from credit watch negative.

Separately, Moody's Investor Service on Wednesday placed the United States' triple-A rating on a downgrade watch as the lawmakers struggles to negotiate a debt deal.

Asian markets edged lower on global economic concerns.

In Paris CAC-40 Index declined 42.05 to 1.1% to 3,751.23 and in Frankfurt DAX Index edged lower 53.13 or 0.7% to 7,214.74. The benchmark index in Italy dropped 1.1% or 202.30 to 18,640.30.

Italy completed the sale of five-year bonds of €1.25 billion at 4.93%, higher than the yield of 3.9% of similar debt sale in June.

The sharp rise in the cost of debt was anticipated but market sighed relief after the completion of the sale. In all, Italy sold today €3.7 billion of debt with maturities as long as 15 years.

Euro-zone Inflation Stable

Euro-zone annual inflation was 2.7% in June, unchanged compared to May, matching the flash estimate, according to final data released from Eurostat today.

Inflation in the EU27 eased to 3.1% in June from 3.2% in May. A year ago, the rate was 1.9%. On a monthly basis, prices slid 0.1% in June.

Lafarge Sells Gypsum Assets

Lafarge SA entered into exclusive negotiations with Belgium's building materials and systems firm Etex Group for the sale of its European and South American Gypsum assets at an enterprise value of €1 billion or about $1.41 billion.

Lafarge would receive net cash proceeds of about€ 850 million and a 20% interest in the new partnership. The company stated that as per the contractual rights, it will be able to sell the 20% interest to Etex Group after 5 years.

UBS, Credit Suisse Plans Jobs Cut

UBS AG, the Swiss financial services firm is likely to cut about 5,000 jobs and its rival Credit Suisse Group is planning to axe nearly 1,000 jobs, reports said quoting Swiss newspaper Tages-Anzeiger daily.

The UBS is expected to save Sfr1 billion or $1.2 billion a year, the newspaper reportedly said, citing unidentified sources. Credit Suisse intends to save 800 million francs and reduce costs by 5%.

Gainers & Losers

Heidelberger Druckmaschinen AG plunged 6.3% to €2.29 after the manufacturer of printing presses reported first quarter sales of €544 million compared to revenues of €563 million a year earlier, after adjusting for exchange rate effects of €19 million.

Software AG plummeted 15.4% to €35.60 after the enterprise software company achieved second quarter total revenues of about €256 million to €258 million compared to prior-year revenues of €267.3 million.

Suedzucker AG fell 1.7% to €25.52 after the German sugar company reported first quarter revenues improved 6.9% to €1.64 billion from €1.53 billion in the comparable period. Net earnings in the quarter grew 28% to €92 million from €72 million last year. Undiluted earnings per share were 0.48 euros higher than 0.38 euros in the year earlier quarter.