Stable Demands at Debt Auctions of Spain, Greece and Belgium

Arthi Gupta
17 Jan, 2012
New York City

European markets rose after the debt auctions from Spain, Belgium and Greece attracted stronger than anticipated interest. German confidence index showed a strong improvement. Spain raised

[R]2:10 PM Frankfurt – European markets rose after the debt auctions from Spain, Belgium and Greece attracted stronger than anticipated interest. German confidence index showed a strong improvement. Spain raised €4.88 billion from and Greece sold €1.625 of 13-week treasury bills today.[/R]

European markets surged after Spain, Belgium and Greece successfully placed bonds amid strong demands. Investors focused on the busy earnings season and economic data from the region and China.

Standard & Poor lowered its credit opinion on the European rescue fund, EFSF. The views of credit review agencies are increasingly ignored and questioned by investors after the S&P and the Moody’s awarded their highest views on the worthless mortgage securities in the U.S.

“The downgrade to ‘AA+’ by only one credit agency will not reduce (the) EFSF’s lending capacity of €440 billion,” Klaus Regling, the fund’s chief executive officer, said in a statement.

Germany ruled out boosting its commitments to the fund.

German Chancellor Angela Merkel''s spokesman, Steffen Seibert told reporters: ""The government has no reason to believe that the volume of guarantees that the EFSF has now should not be sufficient to fulfil its current obligations.”

Credit review agency Standard & Poor''s downgraded nine euro-zone nations last Friday, including the top-rated France and Austria.

Italian Prime Minister Mario Monti said in an interview to the Financial Times that Germany and other creditor nations should do more to help Italy and other indebted nations to lower their borrowing costs.

Monti warned that there would be a powerful political backlash among the euro-zone''s struggling periphery if the creditor countries failed to act.

European Council President Herman Van Rompuy noted that the European Union will agree on the new fiscal compact treaty at the end of this month and is expected to be signed in the early March.

China''s gross domestic product grew 8.9% from a year ago in the fourth quarter of 2011, down from 9.1% in the third quarter, according to the latest data from the National bureau of Statistics.

The ZEW indicator of economic sentiment for Germany surged 32.2 points to -21.6 points in January, the highest level of the indicator since July 2011.

In Paris trading, the CAC-40 Index gained 43.58 or 1.4% to 3,268.58 and in Frankfurt the DAX Index edged higher 108.45 or 1.7% to 6.328.33.

Spain, Greece and Belgium Sell Bonds

Italian 10-year government bond yields fell 9.5 basis points to 6.55% and Spanish 10-year bond yields declined 8 basis points to 5.07% and a Spanish debt auction met its maximum target.

The Spanish Treasury raised €4.88 billion from the 12-and 18-month treasury bills sale on Tuesday versus its target of between €4 billion and €5 billion.

The Treasury issued €3.07 billion in 12-month notes at an average yield of 2.049% compared to 4.05% in the prior auction held in December 13. The bid-to-cover ratio of 3.5 compared to 3.1 in the prior auction.

The Treasury also issued €1.87 billion in 18-month notes at an average yield of 2.399% compared to 4.226% in the prior auction in December. The bid to cover ratio was 3.2 compared to previous 5.

The Greek Public Debt Management Agency sold €1.625 billion of 13-weeks paper versus the €1.25 billion on offer. The sale attracted bids totaling €3.630 billion.

The yield fell to 4.64% from 4.68% at the last auction on December 20. The bid-to-cover ratio was 2.90 compared with 2.91 in the previous sale.

Belgium sold €2.96 billion of treasury bills today.

The Belgian Debt Agency sold €1.76 billion of 3-month bills at yield of 0.429%, up from 0.264% paid in the previous sale on January 3. The bid-to-cover ratio improved to 2.24 from 2.13.

The country placed €1.2 billion of its 12-month T-bills at a yield of 1.162%, down from 2.167% in an auction in December. Demand was 2.06 times the offer, less than the 2.21 in the previous sale.

Yesterday, France raised €8.59 billion at the first debt sale the country held after Standard & Poor’s knocked off France from its highest view and Moody''s Investors Service affirmed its highest opinion.

Gainers & Losers

Barry Callebaut AG rose 0.4% to Sfr898 after the Swiss manufacturer of cocoa and chocolate products, reported sales revenue fell 4.1% to Sfr1.273 billion compared to Sfr1.327 billion in the prior year period.

Gerry Weber International AG climbed 1.9% to €26.25 after the German fashion and lifestyle firm said revenues for fiscal year 2011, according to preliminary figures, increased 13% and earnings before interest and taxes grew 19.6%, mainly driven by improved performance in retail segment.

The company estimated revenues of €702.7 million for the fiscal year 2011, higher than €621.9 million last year. The company is slated to release its final data for the financial year 2011 on February 27.

Holcim Ltd. gained 1.9% to Sfr51.95 after the Swiss-based cement company said it will recognize extraordinary cash-neutral impairment charges of around Sfr775 million in the fourth quarter against its net income. These include a charge related to restructuring of its South African business, AfriSam, and also charges stemming from weak demand for construction materials.

Metro AG soared 3.9% to €28.32 after the retailing company said fourth quarter sales declined 1.3% to €19.5 billion from €19.7 billion last year, due mainly to disappointing holiday sales and negative currency impacts.

Separately, Metro said it has suspended takeover talks for its department store subsidiary, Galeria Kaufhof, citing unfavorable financial market conditions.

SGS SA increased 2.2% to Sfr1,660 after the provider of inspection, verification, testing and certification services reported full year 2011 revenues rose 0.8% to Sfr4.8 billion.

Profit for the year, on a reported basis, decreased to Sfr534 million or 70.16 francs per share from Sfr588 million or 77.22 francs per share last year.