Bonds: Success at Spanish debt auction eases tension

Date: Thursday 07 Jun 2012

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

Spain: 6.09% (-19bp)
Italy: 5.71% (+4bp)
France: 2.57% (+16bp)
Germany: 1.37% (+4bp)
UK: 1.72% (+5bp)
US: 1.65% (+7bp)

A successful Spanish debt auction and expectations that the major world economies will conduct a coordinated round of monetary easing reduced the pressure on the Eurozone on Thursday.

Spain sold just over €2bn in debt, €600m of which was in benchmark 10 year maturities. The interest on the 10 year tranche was 6.044%, higher than at a similar auction last month. Crucially, the demand for the bonds was high, 3.29 times greater than the number of securities available.

This means, for now, Spain is not shut out of the debt markets which can only be a good thing for the Eurozone.

In a separate development, the People’s Bank of China announced it would reduce its one year deposit rate to 3.25% from 3.5% and the one year lending rate from 6.56% to 6.31%. This is the first such move in eight years by the Chinese and suggests other major economies are planning a coordinated round of monetary easing.

BS

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