Italy Sells

Arthi Gupta
27 Jan, 2012
New York City

European markets traded sideways and Italy sold

[R]1:00 PM Frankfurt – European markets traded sideways and Italy sold €11 billion in bills today. Spanish jobless rate rose to 22.9% in the fourth quarter and Greek negotiations founder. AEGON entered into €2 billion syndicated credit facility.[/R]

European markets traded sideways as talks continue between Greece and its private bondholders but two sides remain apart and Italy sold €11 billion in bills today, meeting its target.

European leaders are increasing facing the possibility that Greece will overshoot its deficit and debt target and economy may shrink more than expected.

Greek economy is expected to shrink 6% in 2011 and fall another 5% in 2012 and government debt to GDP may jump more than 160% in the current year as tax collection lags. The Greek lawmakers are resisting the reform measures that will speed up the opening up of the economy and increase mobility in the labor force.

The Greek government needs to restructure its debt to reduce it to 120% of GDP by 2020 from the current 160% level which is increasingly unlikely.

In Paris trading, the CAC-40 Index dipped 1.59 or 0.04% to 3,361.64 and in Frankfurt the DAX Index edged higher 21.43 or 0.3% to 6,561.76.

For the week, the CAC-40 Index rose 1.2% and the DAX Index soared 2.4%.

Italy’s 10-year bond yields fell 9 basis points to 5.96% after investors stepped up demand for the government debt and Spanish 10-year bond yields dropped 10 basis points to 5.11.

Italy Bond Auction

Italy sold €11 billion of Treasury bills today as borrowing costs slumped from the previous sale.

The Italian Treasury sold €8 billion of 182-day bills at an average yield of 1.969%, down from 3.251% at the last auction of similar-maturity securities on December 28. The bid-to-cover ratio declined to 1.35, from 1.69 last month.

The Treasury also sold €3 billion of 331-day bills at an average yield of 2.214%.

Spanish Retail Sales Drop, Jobless Rate Up

Retail sales in Spain declined 6.2% from a year ago at constant prices in December, following a 7.3% fall in November, data from the statistics office Ine showed.

Separately, Spain''s jobless rate rose to 22.9% in the fourth quarter from 21.5% in the third quarter, data from the statistics office INE showed today.

Gainers & Losers

AEGON NV fell 1.1% to €3.69 after the life insurance and pension groups said it completed a €2 billion syndicated credit facility agreement with a syndicate of international banks led by Bank of America and Citigroup Global Markets.

EADS N.V. rose 1.8% to €25.91 after the defense contractor designated Tom Enders to take over the role of CEO when Louis Gallois steps down at the end of his mandate.

CaixaBank, S.A. declined 1% to €3.94 after the Spanish bank reported fiscal year 2011 net income fell 13% to €1.053 billion from the year before.

ThyssenKrupp AG dipped 0.1% to €22.12 after the diversified industrial group is close to approving a deal to sell its Inoxum stainless steel unit to Finland-based Outokumpu Oyj, Financial Times Deutschland reported.

Transocean Limited, the provider of offshore contract drilling services for oil and gas wells surged 7% to Sfr46.46 after a federal judge said that BP Plc will have to bear all costs related to the Deepwater Horizon disaster that struck the Gulf of Mexico in 2010.