Spain Raises

Arthi Gupta
19 Jan, 2012
New York City

European markets rose after yields fell at a French bond auction and Spain raised

[R]1:30 PM Frankfurt – European markets rose after yields fell at a French bond auction and Spain raised €6.61 billion. Commerzbank surged 13% after the bank intended to achieve a Core Tier 1 ratio of more than 11% as of June 30. Greek talks flounder as negotiators drive a hard bargain.[/R]

European markets gained after successful debt sale by Spain and France. Traders are optimistic on the outcome as the Greek government heads into a second day of talks with private creditors on a crucial bond swap deal.

However, Greek talks may be tense till the last minute as private lenders and hedge funds drive a hard bargain. Greece is expected to lower its debt by €100 billion in the next three years and exchange a new security that pays less than 4% interest rate.

Even after the debt restructuring, Greece is expected to struggle until the end of the decade and debt as a percentage of GDP estimated to decline 120% of GDP from the current 140%.

Fitch credit opinion agency may downgrade six euro area countries by one or two levels by the end of this month, managing director Edward Parker said on Wednesday.

The six countries put on ratings review in December include Spain, Italy, Cypress, Slovenia, Belgium and Ireland.

In Paris trading, the CAC-40 Index gained 45.22 or 1.4% to 3,310.05 and in Frankfurt the DAX Index edged higher 43.68 or 0.7% to 6,398.96.

The average yield on the Spanish 10 year bonds fell to 5.403%.

Spanish, French Bond Auctions

Spain raised €6.61 billion from the sale of its bonds maturing in 2016, 2019 and 2022 on Thursday, far exceeding the maximum target of €4.5 billion set for the auction, reports said.

The Treasury issued €1.3 billion in 2016-year bonds at a yield of 4.021% compared to the prior yield of 3.912%. The bid-to-cover ratio was 3.24 compared to 1.71 the last time the previous auction on November 17.

The Treasury issued €2.3 billion in 2019-year bonds at a yield of 4.541% compared to the prior yield of 5.110%. The bid to cover ratio was 2.01.

The Treasury issued €3.01 billion in 2022-year bonds at a yield of 5.403% compared to the prior yield of 6.975%. The bid to cover ratio was 2.17, versus 1.54 when it was last offered in November.

Separately, France saw its borrowing costs decline at an auction of medium term debt maturing through 2016 on Thursday, reports said.

The Agence France Tresor raised €7.965 billion of medium-term bonds in total versus its target set between €6.5 billion and €8 billion.

The agency sold €2.961 billion of 3% July 2014 bonds at a yield of 1.05%, down from 1.58% in the previous auction on October 20. Demand was 2.1 times the offer, down from 2.98 in the previous sale.

The country placed €1.575 billion 2% July 2015 bonds at a yield of 1.51%, down from 2.44% in an auction on November 17. The bid-to-cover ratio rose to 3.4 from 2.4.

The debt agency also sold €3.429 billion of 2.50 percent July 2016 bonds at a yield of 1.89%, down from 2.82% in a sale on November 17. Demand was 2.1 times the offer, down from 1.68.

Gainers & Losers

Aurubis AG rose 1.1% to €41.33 after the copper producer stated fourth quarter sales rose 27% to €3.57 billion, from €2.82 billion in the comparable period last year. Also, in London trading opper price rose to a 4-month high.

Carrefour SA fell 1.8% to €17.15 after the retailer said fourth-quarter sales dipped 1% to €24.15 billion, but were up 0.3% on a on a constant currency basis and comparable sales slipped 0.6% on a constant currency basis.

Commerzbank AG surged 12.5% to €1.59 after the Germany-based bank intends to fulfil the requirements of the European Banking Authority amounting to €5.3 billion by June 30 from its earnings.

Koninklijke Ahold NV slid 1.1% to €10.16 after the international supermarket operator reported fourth quarter consolidated net sales rose 4.5% to €7.29 billion from €6.98 billion in the prior-year quarter.

For the full year 2011, consolidated net sales advanced 2.5% to €30.3 billion compared to 2010.

Metro AG climbed 0.7% to €28.28 after the German retailer inked a €1 billion credit line to refinance an existing facility and fund its business, Bloomberg reported on Thursday, citing lenders Societe Generale SA and UniCredit SpA.

Rémy Cointreau SA declined 2.9% to €64.44 after the French liqueurs and spirits maker reported third quarter total turnover rose 30% to €346.1 million from €266.6 million a year earlier.