Italian Yields Approach 4%, Spanish Yields Rise

Devan Biswas
13 Jun, 2012
New York City

European markets were on the defensive ahead of Greek elections. Spanish bond yields rose and Italian bond yields jumped at a debt auction of shorter term maturities. Spanish apparel retailer Inditex lifted its quarterly outlook.

[R]2:20 PM Frankfurt – European markets were on the defensive ahead of Greek elections. Spanish bond yields rose and Italian bond yields jumped at a debt auction of shorter term maturities. Spanish apparel retailer Inditex lifted its quarterly outlook.[/R]

European markets edged lower ahead of Greek election this Sunday and yields in bond markets rose for Italy and Spain.

Market indexes were on the defensive as nervous investors sought the safety of German bunds and bond yield of Spanish bonds increased to a record high after the nation joined the euro zone.

In London trading, FTSE 100 index decreased 1.75 to 5,471.99, CAC 40 index in Paris fell 4.63 to 3,042.28, DAX 30 index in Frankfurt fell 24.58 to 6,136.88. Indexes in Milan, Athens and in Zurich declined 0.3% and in Madrid rose 1.1% to 6,596.30.

The Spanish 10-year government bond yield increased to 6.73% in the early trading in Madrid after reaching as high as 6.83% in yesterday’s trading.

Italian bond yields surged as the Italian government sells €6.5 billion of Treasury bills. One-year bill rate increased to 3.97% from 2.34% at the earlier auction on May 11 and bid-to-cover ratio declined to 1.73 from 1.79.

The yield on 10-year Italian bonds declined 4 basis points to 6.13% and the Treasury is scheduled to sell €4.5 billion in 3-year bonds and two longer term bonds it sells occasionally.

Germany also placed 10-year bonds worth €4 billion at an average yield of 1.5% as risk-averse investors sought the safety of Bunds.

Stock Movers

Inditex SA, the operator of Zara stores soared 8% to 73 estimated first quarter net profit to increase 30% to €432 million and sales to rise to €3.4 billion. Inditex operates 5,600 stores and generates 75% of its revenues in Europe and increasingly focuses on China to drive the company sales.

Iberdrola said it plans to invest €1.6 billion to build its first offshore wind farm in Germany with a capacity of 400 megawatts that could supply annual electricity to 350,000 homes.

Pirelli, the Italian tire maker said today it purchased Swedish tire distributor Dackia Holding AB from private equity fund Procuritas Capital Investors for €70 million.

Oerlikon Corp AG completed the sale of Sfr 300 million 4-year bonds with a coupon of 4.25% and the offering was managed by Credit Suisse and Deutsche Bank and UBS.