Bonds: Distressed nation yields fall

Date: Tuesday 17 Jan 2012

These were the yields and movements on the 10 year bonds of some of the most watched countries by the close in Europe:

Italy: 6.51% (-11bp)
Spain: 5.13% (-6bp)
France: 2.8% (+9bp)
Germany: 1.79% (+2bp)
UK: 1.96% (-1bp)
US: 1.86% (-1bp)

Spain saw the interest it paid on 1 year debt fall from 4.05% in December to 2.049% today, following a bond auction this morning. The decline was broadly mirrored in the 18 month notes that were also sold to investors.

The European Financial Stability Facility (EFSF), the bail out fund designed to prop up the euro, lost its AAA credit rating from Standard and Poor’s last night following the downgrade of one of its main backers, France.

The downgrade may have the effect of reducing the “firepower” of the EFSF to support the distressed Eurozone countries, some fear.

On that note, tomorrow talks are expected to resume between Greece and its creditors as they try to hammer out a final agreement on how much of its debts the bankrupt country should actually pay back.

However, judging by recent movements in sovereign bond auctions it seems short terms fears over the euro area breaking apart are receding, or at least for now.

BS

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