Italy Auctions

Arthi Gupta
30 Jan, 2012
New York City

European markets edged lower ahead of the EU leaders meeting in Brussels later today and Italy auctioned

[R]1:30 PM Frankfurt – European markets edged lower ahead of the EU leaders meeting in Brussels later today and Italy auctioned €7.5 billion in long-term debt today at lower yields. ABB agreed to acquire Thomas & Betts for $3.9 billion. Philips swung to quarterly loss.[/R]

European markets edged lower ahead of the meeting of European Union leaders in Brussels later today to discuss measures to spur growth.

The meeting is scheduled to finalize a fiscal pact and the endorsement of the European Financial Stabilization Mechanism with a total volume of up to €500 billion.

Greek leaders appear to agree on broad terms of the debt structuring with international lenders. Greek Prime Minister Lucas Papademos and three party leaders said they are in general agreement with lenders but resisted the calls to lower private sector pay rates and calls from Germany to audit government budgets.

In another downturn, Fitch Ratings downgraded the long-term issuer default ratings of Spain, Italy, Belgium, Cyprus and Slovenia. The ratings agency also affirmed Ireland''s rating.

The agency noted the euro-zone crisis will only be resolved as and when there is broad economic recovery and substantial reforms of the governance of the euro-zone will be required to secure economic and financial stability, including greater fiscal integration.

In Paris trading, the CAC-40 Index declined 29.90 or 0.9% to 3,288.86 and in Frankfurt the DAX Index edged lower 36.71 or 0.6% to 6,475.14.

Italian Bond Auction

The Italian government successfully sold €7.48 billion of long-term debt at lower yields today, out of an €8 billion target.

The Italian Treasury sold €2 billion of a benchmark 10-year bond at an average yield of 6.08%, down from 6.98% at the last auction on December 29. The bid-to-cover ratio was 1.416 compared to 1.36 the last time around.

The Treasury also sold €3.57 billion of 5-year bonds at 5.39%, down from 6.47% at the last auction of similar securities on December 14. The bid-to-cover ratio was 1.297.

The Italian Treasury also sold €746 million in bonds due 2016 at an average yield of 4.79% compared to 6.47% in the last auction. The bid-to-cover ratio was 1.42.

Italy sold €1.155 billion in March 2021 bonds at a yield of 5.74% compared to 4.730% in the last auction with a bid-to-cover of 1.5.

The Italian 10-year yield rose 22 basis points to 6.12%t and similar-maturity Spanish yields increased 10 basis points to 5.06%.

Euro-zone Sentiment Strengthens

Euro-zone economic confidence improved in January, a survey carried out by the European Commission showed today.

The corresponding indicator rose to 93.4 in January from 92.8 in December.

Spanish Economy Contracts

The Spanish economy contracted 0.3% sequentially in the fourth quarter, in line with the quarterly estimates from the Bank of Spain, the latest official data show.

For the year 2011, the GDP expanded 0.7% matching the estimates of Bank of Spain.

ABB to Acquire Thomas & Betts

ABB Ltd. agreed to buy U.S.-based low voltage products maker Thomas & Betts Corp. for $72 per share in cash or around $3.9 billion to expand its presence in the North American low-voltage products market.

The offer price represents a 24% premium to Thomas & Betts'' closing stock price on January 27.

Gainers & Losers

Carrefour SA slumped 3.5% to €17.62 after the retailer said its board unanimously selected Georges Plassat to succeed Lars Olofsson as Chairman and Chief Executive Officer.

Hochtief AG plunged 3.8% to €49.07 after the construction group estimates fiscal year 2011 consolidated net loss of around €160 million, wider than the previous guidance of a loss of €100 million.

Koninklijke Philips Electronics N.V. fell 2.6% to €15.18 after the electronics company stated fourth quarter total revenues rose 3.2% to €6.7 billion from €6.49 billion reported for the same period last year.

The company reported a net loss of €162 million, or 17 cents loss per diluted share for the fourth quarter compared to a profit of €463 million or 49 cents per diluted share for the corresponding quarter last year.

For fiscal year 2011, net loss was €1.30 billion or €1.36 per share compared to prior year''s profit of €1.45 billion or €1.52 per share. Annual sales grew to €22.58 billion, a 4% increase on comparable basis.

UniCredit SpA rose 0.3% to €3.66 after the Italian lender said it raised €7.482 billion in new equity to meet higher capital requirements demanded by European and global regulators.

Separately, the company is most likely to face enforcement proceedings from the British and Swiss regulatory authorities in the rogue trader case that has cost the bank about $2.3 billion, according to the Wall Street Journal on Sunday.