Stronger Demand for German Bonds, Yield Stay Negative

Arthi Gupta
10 Sep, 2012
New York City

The European markets declined and Germany sold 6-month treasury bills at negative yields but Italian and Spanish yields rose. Glencore confirmed its sweetened offer for Xstrata Plc is final. Transocean agreed to sell 38 shallow water drilling rigs to Shelf Drilling for $1.1 billion.

[R]3:30 PM Frankfurt – The European markets declined and Germany sold 6-month treasury bills at negative yields but Italian and Spanish yields rose. Glencore confirmed its sweetened offer for Xstrata Plc is final. Transocean agreed to sell 38 shallow water drilling rigs to Shelf Drilling for $1.1 billion.[/R]

European markets turned lower after a week of surge driven by the European Central Bank’s readiness to buy euro bonds.

Bond yields on Spain and Italy rose again today ahead of the German court’s legality ruling about the setting up of rescue funds.

The Greek Prime Minister Antonis Samaras is scheduled to meet troika officials today and it is not clear if the struggling nation will win the next tranche of austerity measures.

Economic data from the world’s second largest economy too did not lift investor sentiment. A slew of data released from China shows that the country’s annual consumer price inflation rose to 2% in August from 1.8% in July

Separately, China's trade surplus soared to $26.66 billion in August compared to $25.1 billion in July. Exports rose 2.7% annually and imports declined 2.6%.

In Paris trading, the CAC-40 Index declined 12.94 or 0.4% to 3,506.11 and in Frankfurt the DAX Index edged lower 1.36 or 0.02% to 7.213.30.

The yields on Spain’s benchmark 10-year rose four basis points to 5.67%. Italian 10-year yields increased eight basis points to 5.14%.

German Auction Yields Negative

Germany sold €3.40 billion of its March 2013 Bubill at an average yield of -0.0147% compared to -0.0499% in the previous sale on August 13, the Bundesbank said. The sale drew bids totaling €5.125 billion.

The bid-to-cover ratio rose to 1.5 from 1.3.

Transocean Agrees to Sell Shallow Water Drilling Rigs

Transocean Ltd. agreed to sell 38 shallow water drilling rigs to Shelf Drilling International Holdings, Ltd. for approximately $1.05 billion. The sales price includes approximately $855 million in cash and $195 million in seller financing.

Transocean will provide various transition support services to Shelf Drilling for a period subsequent to the closing of the transactions that are expected to close in the fourth quarter.

Infosys to Acquire Lodestone

Infosys Ltd, the India-based software services provider agreed to buy Zurich-based Lodestone Holding AG in a deal valued at 330 million Swiss francs or $349.58 million.

The acquisition of Lodestone will strengthen Infosys Consulting and Systems Integration capabilities and expand its presence in continental Europe.

Gainers & Losers

ALK-Abello A/S climbed 0.7% to DKK 375 after the Denmark-based pharmaceutical maker entered into a co-promotion agreement with MSD for GRAZAX in France.

ArcelorMittal SA rose 0.5% to €12.49 and the steel producer reached an agreement with the United Steelworkers union for its steel plants in the U.S.

Estavis AG fell 2.8% to €1.8 after the property company said it would write down certain assets in its financial statements for the 2011/12 fiscal year.

Glencore International plc fell 1.1% to 374.1 pence after the Swiss commodity trader confirmed that its sweetened offer for Xstrata Plc is final. Last week, Glencore revised the offer to 3.05 shares for each Xstrata share from 2.8 shares.

The company added that Xstrata CEO Mick Davis will step down six months after the proposed takeover replaced by Glencore’s chief executive Ivan Glasenberg.

Xstrata Plc soared 2.5% to 1,041 pence after its Australian coal unit planned to slash approximately 600 jobs on the industry wide slowdown.