Greece Wins Bailout; Italian Bond Yields Fall in Auction

Arthi Gupta
14 Mar, 2012
New York City

European indexes extended gains after euro area countries approved a second bailout package for Greece today. Fitch upgraded Greece''s long-term foreign and local currency debt ratings. Italy sold

[R]2:00 PM Frankfurt – European indexes extended gains after euro area countries approved a second bailout package for Greece today. Fitch upgraded Greece''s long-term foreign and local currency debt ratings. Italy sold €6 billion of bonds at lower borrowing costs.[/R]

European indexes edged higher after the euro area member states today formally approved the second adjustment program for Greece, according to a statement from the president of the Eurogroup, Jean-Claude Juncker.

In the prepared statement Juncker stated, “All required national and parliamentary procedures have been finalised.”

The member states have also authorised the EFSF to release the first instalment of €39.4 billion to be disbursed in several tranches.

Fitch Ratings upgraded Greece''s long-term foreign and local currency debt ratings to B- with ''stable'' outlook from ''Restricted Default.''

The rating actions follow the official confirmation of a 96% participation in the distressed debt exchange and the initial exchange of €177 billion of Greek-law bonds for new securities.

The rating agency said the distressed debt exchange and the losses imposed on bondholders have significantly improved Greece''s debt service profile and reduced the risk of a recurrence of near-term repayment difficulties on the new Greek government securities.

In Paris trading, the CAC-40 Index rose 27.89 or 0.8% to 3,578.05 and in Frankfurt the DAX Index edged higher 84.00 or 1.2% to 7,079.23.

Italy’s 10-year bond yield traded at 4.88% and Spanish yields climbed two basis points to 5.18%.

Italian Bond Auction

Italy sold €6 billion of bonds today at lower borrowing costs and of the total the treasury placed €5 billion of a new three-year BTP bond maturing in March 2015 at an average yield of 2.76% compared to an average yield of 3.4% at the previous auction on February 14. The bid-to-cover ratio was 1.56 compared to the 1.40 in the last auction.

The Treasury also sold €1 billion of BTP bonds maturing on September 2019 at an average yield of 4.3%.

Euro-zone Production Rebounds

Industrial production in the euro area rose 0.2% from a month ago in January compared to the 1.1% fall in December, Eurostat said today.

On a yearly basis, industrial production eased to 1.2% in January from the 1.8% drop in December.

IEA Reaffirms Outlook

The International Energy Agency in its monthly Oil Market Report held its 2012 oil demand growth forecast steady at 0.8 million barrels per day to 89.90 mbd.

Tight market fundamentals and risks surrounding Iran underpin 20% rise in crude prices since December, the report said.

Gainers & Losers

adidas AG dipped 0.5% to €59.72 after the maker of athletic footwear and apparel maker plans to launch the offering of a convertible bond of up to €500 million maturing on June 14, 2019.

Bayer AG fell 0.8% to €55.17 after the German conglomerate said sales of Bayer HealthCare are expected to reach approximately €20 billion in 2014, while Bayer CropScience aims to raise sales to more than €8 billion.

Carrefour SA, the French supermarket chain declined 0.7% to €18.90 after a broker downgrade.

E.ON AG soared 6.2% to €18.14 after the German utility said full-year 2011 sales rose 22% annually to about €113 billion. Full-year EBITDA was about €9.3 billion, 30% below the prior-year figure.

Hugo Boss AG rose 1% to €85.03 after the German fashion and lifestyle house reported fourth quarter net sales climbed 18% to €499.3 million from €422.4 million last year. Net income in the quarter surged 67% to €53.4 million or 78 cents per share from €32 million or 45 cents per share last year.

Wacker Chemie AG slumped 3.1% to €69.67 after the specialty chemical products company stated fiscal year 2011 consolidated sales rose 3.4% to €4.91 billion from €4.75 billion a year earlier. Net income for the year declined to €356 million or €7.10 per share compared with €497 million or €9.88 per share in 2010.