Bonds: Markets heed EU debt warnings

Date: Monday 12 Dec 2011

The bond market has taken its cue from the credit ratings agencies through Monday, two of which have issued warnings over the failure of the EU summit in Brussels last week.

Moody’s said that in spite of the deals hammered out in Brussels it still intends to “revisit the ratings of all EU (countries) during the first quarter of 2012.”

Its reasons for threatening to downgrade the credit rating of countries like France and Germany were “the absence of measures to stabilise credit markets over the short term” which Moody’s argues “means that the euro area, and the wider EU, remain prone to further shocks.”

Less sombre were remarks from Jean Michel Six, the chief European economist for Standard & Poor’s. In his opinion, the EU summit constituted a significant step forward but more is needed and “time is running out.”

The Italian Treasury has today auctioned €7bn in 12 month debt, with yields coming in at 5.952% versus 6.087% the last time around. This, at least, is hopeful news.

At 6:27PM in Frankfurt these were the interest rates of the major sovereigns on the open market:

Italy 6.562% +20bp
Spain 5.789% + 4.4bp
France 3.282% +1.7bp
Germany 2.02% -12.8bp
US 2% -5.9bp
UK 2.1% -5.8%

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