ECB Holds Rate, Spanish Bond Auction Raises

Arthi Gupta
08 Nov, 2012
New York City

The European indexes gained after the European Central Bank held key rate. The euro area economic climate deteriorated in the fourth quarter. Spain sold

[R]3:10 PM Frankfurt – The European indexes gained after the European Central Bank held key rate. The euro area economic climate deteriorated in the fourth quarter. Spain sold €4.76 billion of bonds at lower yields.[/R]

The European indexes edged higher after the European Central Bank held its key interest rate unchanged at a record low of 0.75% for the fourth consecutive month.

The central bank also maintained its deposit rate at zero and the marginal lending facility rate at 1.5%.

Separately, the Bank of England left the interest rate unchanged at 0.5% and maintained its quantitative easing at £375 billion.

In Paris trading, the CAC-40 Index gained 21.67 or 0.6% to 3,429.78 and in Frankfurt the DAX Index edged higher 21.99 or 0.4% to 7,254.75.

The yields on Spain’s benchmark rose 14 basis points to 5.86%. Italian 10-year yields climbed nine basis points to 5%.

Yesterday, the Greek parliament approved a law on austerity measures paving the way for securing the next bailout tranche worth €31.5 billion from the international lenders.

Euro Zone Economic Climate Worsens

The Ifo Economic Climate Indicator for the euro area dropped to 81.7 in the fourth quarter from 88.9 in the third quarter as assessments of the current economic situation deteriorated and the six-month economic outlook was significantly more negative.

Inflation estimates in the euro zone increased to 2.4% in 2012 from 2.2%, according to the survey.

Spanish Bond Auction

Spain sold €4.76 billion of bonds maturing in three, five and 20 years, more than its maximum target.

The Spanish Treasury sold €3 billion of five years bond maturing in 2018 at an average yield of 4.680%. The bid-to-cover ratio was 1.57 compared with 2.55 at a similar debt sale last month.

The country also raised €992 million from the bond maturing in 2015 at an average yield of 3.66% compared to an average yield of 3.956% in a similar auction last month. The bid-to-cover ratio for the 2015 bond rose to 2.8 compared with 2 at the last auction held in October.

Spain sold €732 million of bonds maturing in 2032 at an average yield of 6.328% compared with 4.777% in the previous auction in October 2010. The bid-to-cover ratio was 2.1.