Spain Sells

Devan Biswas
07 Jun, 2012
New York City

European markets advanced after political leaders stepped up activities that may lead to direct lending to Spanish banks. IMF officials estimate as much as

[R]4:10 PM Frankfurt – European markets advanced after political leaders stepped up activities that may lead to direct lending to Spanish banks. IMF officials estimate as much as €40 billion capital needed by Spanish banks. UK holds interest rates and unemployment rises in France and Greece.[/R]

European markets advanced more than 1% after Spain successfully sold more than planned long term bonds at a lower than market yields.

The FTSE 100 index jumped 1.7% or 92.80 to close 5476.91, DAX index in Frankfurt gained 2% or 118.90 to close at 6,213 and CAC 40 index in Paris traded up 1% or 31.4 to close at 3,089.51.

Market indexes gained across the euro zone after sovereign bond yields eased as political leaders stepped up activities to lay the ground work to facilitate direct lending to Spanish banks.

The Spanish Treasury completed the sale of €2.1 billion of medium and long term bonds that yielded 10-year bonds at 6.04%. The yield at the auction was higher than 5.74% in the previous auction in April but lower than peak of 6.5% last week and 6.12% in the hours before the auction.

The bond auction was under intense scrutiny after Spanish Treasury Minister Cristobal Montoro said in a radio interview on Tuesday that if the current market rates hold Spain will have difficulty in accessing financial markets.

In all Spain 2.1 billion euros of bonds comprising of 50-year bonds with yield of 3.27%, 10-year bonds with yield of 2.46% and 15-year bonds with yield of 2.9%. The yields on 15-year bonds and 10-year bonds were 50 basis points lower than the April auction.

The latest jobs data in France and Greece highlighted worsening economic picture. The jobless rate in metropolitan France rose 0.3 percentage points to 9.6% in the quarter to March.

In Greece the statistics agency said unemployment in March rose to 21.9% from 21.4% in February. Hellenic Statistical Authority reported worsening employment outlook for the third year in a row as government and local businesses continue to lay off staff.

The Bank of England left its key lending rate on hold at 0.5% where it has been for the last three years.

The central bank in England also maintained its stimulus program of £325 billion to purchase government bonds as the economy suffers a double dip recession in the first quarter this year and manufacturing sector shrinks at the fastest pace in three years.

UK and Norway signed a landmark energy pact that may see investment of more than £13 billion over the next eight years. The deal will facilitate the supply of natural gas to UK power plants and jointly explore energy resources in the Arctic.

Norway is the second largest supplier of natural gas to Europe after Russia and currently supplies more than one third of UK’s gas needs from its fields in the North Sea.