Bonds: Europe prepares for eurobond battle

Date: Wednesday 27 Jun 2012

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

Spain: 6.93% (+5bp)
Italy: 6.2% (+2bp)
France: 2.66% (+3bp)
Germany: 1.57% (+6bp)
UK: 1.69% (flat)
USA: 1.63% (+1bp)

The under pressure bonds of Spain and Italy remained perilously close to the 7% “death point” that saw Greece, Ireland and Portugal taking out the begging bowl.

Italy managed to borrow a cool €9bn today on the bond markets , unfortunately the notes were only for 185 days and went at a rate of 2.957%, the highest since December.

Meanwhile, the German Chancellor, Angela Merkel, has rubbished the idea of so called eurobonds, a debt instrument that would be underwritten by all members of the euro area.

This means she is on a collision course with the leaders of France, Spain and Italy, who are desperate for ways of reducing the interest rate on their borrowings.

Europe’s political elite gathers in Brussels for a summit starting tomorrow (Thursday).

BS

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