Bonds: Spain and Italy see successful auctions

Date: Thursday 12 Jan 2012

It was a good day for the distressed euro area countries on the international bond markets as the betting seemed to shift to a resolution of the ongoing crisis.

These were the interest rates and movements on some of the most watched countries’ 10 year bonds:

Italy: 6.63% (-35bp)
Spain: 5.13% (-19bp)
France: 3.04% (-12bp)
UK: 2.02% (+1bp)
Germany: 1.84% (+2bp)
US: 1.91% (+0.5bp)

The biggest development today was that Italy and Spain were both successful in issuing debt, short-term in the case of Italy but medium-term in the case of Spain, which placed close to twice the expected amount.

Spain sold just shy of €10bn in three and four year bonds, this was double the target of €5bn. The interest rate on the three year notes was 3.38% versus 5.19% at a similar auction in December.

Italy managed to clear €12bn, mainly in one year debt. The average yield on the bonds maturing in 2013 was just 2.74%, compared to the 5.95% level seen the last time around.

The US Treasury sold has sold $32bn in three year debt at an average yield of 0.37% and with a bid to cover ratio of 3.73. This means that there were 3.73 dollars available for every one dollar that the US government actually wanted. This is a record since the data first began being collected in 1993 and shows how strong investors’ appetite is for safe places to put their money.

Elsewhere, there were suggestions Greece may not be able to persuade its lenders to accept just 50% of their money back.

The news came as Angela Merkel met the head of the International Monetary Fund, Christine Lagarde, to discuss how future bailouts for the euro area may be structured.

It’s thought a new set of budget rules for the single currency area could be agreed by January, a month earlier than expected.

BS

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