European Government Bonds Benefit from BoJ Aggressive Action

Nigel Thomas
11 Apr, 2013
New York City

Government bond market yields across the euro zone dropped near 2-year low as the aggressive Japanese monetary action ripples through. Italy sold 7.2 billion euros of debt and French and Belgian government bond yields declined. Axa SA agreed to sell its U.S. based Protective Life for $1.06 billion.

[R]4:30 PM Frankfurt – Government bond market yields across the euro zone dropped near 2-year low as the aggressive Japanese monetary action ripples through. Italy sold 7.2 billion euros of debt and French and Belgian government bond yields declined. Axa SA agreed to sell its U.S. based Protective Life for $1.06 billion.[/R]

In European trading, market indexes gained fraction across the euro zone and traded near four-and-a-half year high.

Central bank around the world have been providing monetary support to lift asset prices and the latest $1.4 trillion spending program by the Bank of Japan has forced down yields of Belgian and French government bonds.

In London trading, FTSE 100 index added 0.2% or 15.9 to 6,403 and in Frankfurt the DAX index rose 0.4% to 29.8 to 7,840. In Paris, CAC 40 index gained 0.6% or 21.6 to 3,765.

Italy successfully sold 7.2 billion euros of debt including new 3-year notes.

Italian 10-year yields increased 1 basis point to 4.33% and yields on similar Spanish bonds declined three basis points to 4.61%.

Spanish government bond yields are now at the lowest since late 2010 as the aggressive Japanese monetary policy action drive yields lower in the U.S. and in the euro zone.

French government has been the biggest beneficiary of the Japanese action and the yield on the French 10-year bond has fallen to 1.86%.

In Asian markets, stocks traded higher and the Nikkei in Japan closed at 5-year high as the yen inched closer to 100 mark against the dollar.

The Nikkei for the year has surged 30% on top of 23.4% increase in 2011 after the Bank of Japan announced a plan to spend $1.4 trillion in the next two years to break economy from the decade of slump.

Stocks in Review

Axa SA gained 1% after the Paris based insurer agreed to sell its U.S. based Protective Life Corp for $1.06 billion.

Ashmore Plc, the emerging markets focused asset manager, soared 14% after net asset flows in the first quarter increased to $7.3 billion beating the estimate of $1.1 billion by several analysts.

The jump in Ashmore lifted stocks of other asset managers, Man Group by 7.8% and Schroders by 2.8%.

Separately, Man Group said it will no longer be required to hold $300 million in a separate account to meet the UK regulatory required after a change in its regulatory status.

BHP Billiton plc declined 0.8% in London trading among general weakness in mining sector.

BHP also completed the previously announced the sale of its diamond business for $553 million and also said the company discovered high mineralization content of copper in West Australia outback.

Deutsche Telekom sweetened its “final and best offer” for the merger of U.S. based Metro PCS with its T-Mobile unit.

The German parent of T-Mobile, the operator of the fourth largest wireless network in the U.S., said it would lower the total debt at the merged company to $11.2 billion from the previously proposed $15 billion.

The company also extended lock up period to not sell stock in the merged T-Mobile to 18 months from the previous proposal of six months.

The company also delayed a shareholder vote to April 24 ahead of the meeting scheduled to tomorrow to vote on the merger proposal.

Marks & Spencer Group Plc gained 4% after the U.K. based food and apparel retailer reported better than expected quarterly sales.

Evraz plunged 10% after the Russia based steel maker reported a quarterly loss and board of directors did not announce a final dividend. The steelmaker dropped the most since it began trading in London in November 2011.