Spanish Yields Rise in Debt Auction, Danone Slumps 7%

Arthi Gupta
19 Jun, 2012
New York City

The European indexes rose after Samaras inched closer to forming a coalition government in Greece and Spain sold

[R]1:30 PM Frankfurt – The European indexes rose after Samaras inched closer to forming a coalition government in Greece and Spain sold €3 billion of bonds auction at record yields. Danone plunged 6.8% after lowering its operating margin target for the current fiscal year.[/R]

European markets gained on hopes as political leaders inched closer in forming new government in Greece as New Democracy Party leader Antonio Samaras raised the prospect of a coalition government as early as this week.

The Greek President Karolos Papoulias on Monday asked the New Democracy leader Antonis Samaras requested Samaras to form a new government in the next three days as required by the constitution.

New Democracy won 129 of the 300 parliamentary seats whereas the socialist party PASOK led by Evangelos Venizelos secured 33 seats.

Samaras is optimistic of forming a government after talks with PASOK party leader yesterday and is scheduled to meet with the head of Democratic left, Fotis Kouvelis today to garner support. A coalition government of three parties will have 179 seats in the 300-member Greek parliament.

Separately, the International Monetary Fund received $456 billion to add to its crisis firewall as China offered $43 billion to the IMF, while India, Russia, Brazil and Mexico agreed to provide $10 billion each.

The G20 nations meeting at Los Cabos, Mexico urged more efforts by Europe to contain the debt crisis.

In Paris trading, the CAC-40 Index declined 4.34 or 0.1% to 3,062.86 and in Frankfurt the DAX Index edged higher 13.72 or 0.2% to 6,259.76.

The yield on Spain’s benchmark 10-year bonds fell nine basis points to 7.10%.

Spanish Bond Auction

The Spanish Treasury raised €3.04 billion from the sale of its 12- and 18-month bills, slightly higher than the upper limit of €3 billion target set for the sale.

Spain sold €2.4 billion of the 12-month T-bill at an average yield of 5.074% compared with 2.985% at the last auction on May 14. The bid-to-cover rose to 2.20 compared to 1.84 last month.

The Treasury also sold €639 million of 18-month debt at an average yield of 5.107% compared to an average yield of 3.302% last month. The bid-to-cover ratio climbed to 4.40 from 3.23 in the last auction held in May.

Gainers & Losers

Danone SA plunged 6.8% to €48.33 after the French yogurt maker reduced its trading operating margin target for the year 2012 from ""stable"" to ""down 50 basis points on a like-for-like basis"" and the sales growth target was unrevised between 5% and 7% on organic basis.

Danone also left the free cash flow estimate at €2 billion.

Elekta AB rose 0.4% to SEK 327 after the Sweden-based company active in the medical technology sector acquired Radon Ltda., a linear accelerator service company in Brazil.

Julius Baer Group Ltd. gained 0.3% to Sfr32.62 after the Swiss private banking group said it is in discussions with Bank of America Corp. about Merrill Lynch''s international wealth management business.

SMT Scharf AG climbed 2.4% to €20.40 after the supplier of rail-bound transport systems said it received an order worth more than €1 million in Russia for monorail hanging railways.