Small Decline in Spanish Yields after Euro Zone Agreement

Arthi Gupta
10 Jul, 2012
New York City

The euro area finance ministers approved the releasing of

[R]2:30 PM Frankfurt – The euro area finance ministers approved the releasing of €30 billion aid to Spain and the bond yield fell only a fraction from near 7%. Intel said it plans to invest €3.3 billion for a 15% stake in ASML.[/R]

The euro-zone finance ministers after a nine-hour marathon meeting in Brussels extended the deadline for the “correction of the excessive deficit” in Spain by one year to 2014 and also reiterated a commitment to permitting the bailout fund buy government bonds.

The ministers’ revised Spain’s deficit target to 6.3% of GDP compared to previous 5.3% target and 2013 deficit would be lowered to 4.5% from 2.8% in 2014.

The ministers agreed to release €30 billion to banks in Spain by the end of this month through the European Financial Stability Facility. Final approval is expected by July 20. The meeting also discussed a bailout for Cyprus.

Separately, the European Central Bank signed an agreement with the ESFS, the existing bailout fund to act as its agent for buying government bonds on the secondary market.

In Paris trading, the CAC-40 Index gained 32.72 or 1.1% to 3,191.29 and in Frankfurt the DAX Index edged higher 65.22 or 1.0% to 6,453.13.

The yields on Spain’s benchmark 10-year bonds declined 17 basis points to 6.90%. Italian 10-year yields dropped 15 basis points to 5.95%. The small declines in Spanish bond yields after the agreement announcement indicated market remained cautious and the yield could spike up again above 7%.

French Output Drops

Industrial production in France declined 1.9% on a monthly basis in May, following a 1.4% gain in April data from the French statistics office Insee showed.

Greek Bond Auction

Greece sold €1.625 billion or $2 billion of six-month Treasury-bills today at an average yield of 4.70%, the debt agency said.

The bid-cover ratio rose to 2.16 from 2.14 in the June 12 auction.

Dutch Debt Sale

The Dutch State Treasury Agency raised €2.55 billion from the sale of a three-year bond at lower borrowing costs.

The yield on the 0.75% April 2015 bond declined to 0.218% from 0.456% in the previous sale on May 22. The average price was 101.46, higher than 100.84 in May.

Intel to Buy Stake in ASML

Intel Corporation is participating in a multi-party development program with ASML Holding N.V. to accelerate the development of 450-millimeter wafer technology and extreme ultra-violet lithography.

Intel committed €829 million or approximately $1 billion to ASML''s research and development programs and will also initially purchase 10% of pre-transaction issued shares of ASML for €1.7 billion or $2.1 billion.

The chipmaker also plans to purchase an additional 5% of post-transaction issued shares, if it wins shareholder approval for €838 million or $1.0 billion. Intel will then hold a total of 15% of ASML''s issued shares. Total R&D funding and equity investment agreements are €3.3 billion or approximately $4.1 billion.

Gainers & Losers

Evotec AG soared 18.5% to €2.50 after the small molecule drugs developer licensed to Janssen Pharmaceuticals, Inc. a portfolio of small molecules and biologics designed to trigger the regeneration of insulin-producing beta cells.

Sodexo S.A. plunged 4.1% to €58.74 after the catering and vouchers company said third quarter revenues increased 12% to €4.64 billion from a year ago.

TOM TAILOR Holding AG soared 2.6% to €13.60 after the fashion company said second quarter retail segment sales, including e-commerce, rose 26% on comparable store sales rise of 9%.

Total S.A. dipped 0.2% to $44.49 after the oil and gas explorer said it has become operator of the offshore Xerelete concession located in Brazil''s Campos basin. Total plans to commence drilling activities in 2013.