Demand at Spanish Auction Exceeds Goal, European Markets Ease

Arthi Gupta
20 Sep, 2012
New York City

The European indexes declined on weak Chinese manufacturing data. For the second time this week, demand exceeded at Spanish debt auction. Peugeot agreed to sell 75% stake in Gefco to JSC Russian Railways for

[R]3:00 PM Frankfurt – The European indexes declined on weak Chinese manufacturing data. For the second time this week, demand exceeded at Spanish debt auction. Peugeot agreed to sell 75% stake in Gefco to JSC Russian Railways for €800 million.[/R]

European indexes were under pressure after the euro zone private sector contracted for the 12th time in 13 months and Spain managed to sell bonds more than targeted at lower yields.

The Spanish debt auction today was the second this week where investor’s demand exceeded the goal.

Separately, a private survey in China indicated manufacturing activities stabilizing but still shrinking.

The purchasing managers'' index rose to 47.8 in September from 47.6 in August, according to flash results of a survey by Markit Economics and HSBC today.

In Paris trading, the CAC-40 Index declined 25.45 or 0.7% to 3,506.04 and in Frankfurt the DAX Index edged lower 28.09 or 0.4% to 7,362.19.

The yields on Spain’s benchmark 10-year rose nine basis points to 5.78%. Italian 10-year yields increased 10 basis points to 5.02%.

Spanish Bond Auction

The Spanish Treasury raised €4.8 billion from the sale of its 10-year bond and a new 3-year bond. The target set for the sale was between €3.5 billion and €4.5 billion.

Spain sold €858 billion of 10-year bonds at an average yield of 5.666% from 6.647% in the prior sale on August 2. The bid-to-cover ratio rose to 2.85 from 2.4 in the prior sale.

The Treasury also sold €3.94 billion of three-year bonds at an average yield of 3.845%, more than the 3.774% of the prior auction. The bid to cover ratio was 1.6 compared to 2 the last time around.

Peugeot to Sell Gefco Stake

Peugeot SA, the French car-maker entered into exclusive negotiations to sell 75% interest in its Gefco trucking unit to JSC Russian Railways for €800 million or about $1.03 billion.

Peugeot will also receive a special dividend of €100 million from Gefco.

Deutsche Bank Agrees to Sell BHF-BANK

Deutsche Bank AG reached an agreement with Kleinwort Benson Group, the wholly owned subsidiary of financial services group RHJ International SA on the sale of BHF-BANK for €384 million.