Yields Tumble in Debt Auctions of Spain and Italy

Arthi Gupta
12 Jan, 2012
New York City

European markets edged higher after Spain raised double the target from the sale of its long term debt and Italy sold

[R]1:30 PM Frankfurt – European markets edged higher after Spain raised double the target from the sale of its long term debt and Italy sold €12 billion of Treasury bills. Delhaize planned to slash 5,000 jobs.[/R]

The benchmark indexes in Europe gained after bond auctions of Spain and Italy attracted more than expected interests and yields plunged.

Spain successfully raised €10 billion in total, more than twice the target and the yield fell full one percentage point from earlier auctions.

The Italian Treasury also allotted full amount targeted in the auction and the yield dropped 0.5 percentage point or more.

The strong auctions lifted market sentiments across the region in stock trading and banks led the market advance.

The European Commission on Wednesday warned Hungary over its excessive deficit and said the authorities have not taken sufficient action to contain the shortfall.

""Hungary has not made sufficient progress towards a timely and sustainable correction of its excessive deficit,"" the Commission said in a statement.

The Bank of England decided to leave the size of quantitative easing unchanged at £275 billion and hold interest rate at 0.5% on Thursday.

In Paris trading, the CAC-40 Index gained 38.55 or 1.2% to 3,243.38 and in Frankfurt the DAX Index edged higher 86.12 or 1.4% to 6.238.60.

Spanish 10-year yields fell 8 basis points to 5.24% and Italian 10-year yields declined 40 basis points to 6.57%.

Spain Bond Auction

Spain raised €9.98 billion from the sale of its combined long-term debt today, nearly double the maximum target of €5 billion set for the auction, reports said.

The Treasury reportedly sold €4.27 billion of 4% July 2015 bonds at a yield of 3.384% and bid-to-cover ratio was 1.8.

The agency also sold €2.5 billion of 3.25% April 2016 bonds at an average yield of 3.748% compared with 4.871% in the previous auction on July 7, 2011. The bid-to-cover ratio was 2.2.

It also sold €3.211 billion of 4.25% October 2016 paper at an average yield of 3.912% compared with 4.848% on November 3, 2011. The bond was 1.7 times subscribed.

Italy 1-year Borrowing Costs Slump

Italy sold €12 billion of Treasury bills at an auction today.

The Italian Treasury sold €8.5 billion of 1-year Treasury bills, matching target. The yield fell to 2.735% from 5.952% in the previous sale on December 12. The bid-to-cover ratio was 1.5 times versus a bid-to-cover ratio of 1.9 on December 12.

The agency also sold €3.5 billion of 136-day paper at 1.644%. The bid-to-cover ratio on the 136-day note was 1.85.

The benchmark index in Milan surged 3.1% to 15,349.97 and Madrid''s IBEX 35 rose 1.7% to 8,567.50.

Euro-zone Output Falls

Euro-zone industrial production fell 0.1% from a month ago in November as against the upwardly revised 0.3% decline in October, data released by statistics office Eurostat showed today.

Gainers & Losers

Allianz SE soared 3.4% to €79.63 after the German insurer is likely to convert its €750 million non-voting capital stake in Commerzbank AG to help the banking firm strengthen its core capital, reports said citing people familiar with the matter.

Delhaize Group SA plunged 8.6% to €42.80 after the Belgian food retailer said fourth quarter revenues grew 7.6% to €5.64 billion from €5.24 billion last year, mainly driven by the Delta Maxi acquisition.

The company also announced to cut 5,000 jobs and closure of 146 stores across its network in the U.S. and Southeastern Europe.

Deutsche Lufthansa AG gained 0.3% to €9.21 after the German aviation group reported revenue seat-kilometers for the group increased 6.7% to 15.71 billion in December from the same month last year.

The load factor slipped 1.1 basis points to 75.5% in December.

Suedzucker AG fell 0.9% to €24.01 after the German sugar company said third quarter revenues rose 19.2% to €1.906 billion from €1.599 billion in the prior year. Net earnings in the quarter increased 67% to €109 million or 58 cents a share from €65 million or 34 cents a share in the prior year.

Vestas Wind Systems A/S slumped 4.1% to DKK 60.40 after the Danish manufacturer of wind turbines said it will cut 2,335 employees in the coming months as part of its plans to reduce costs.

Vinci SA advanced 1.9% to €36.12 after the French construction group said that it has partnered with GDF Suez SA and a subsidiary of state-owned financial institution Caisse des Dépôts et Consignations to submit bids to build and operate wind farms off the French coast.