Bonds: Spanish auction eases tensions

Date: Thursday 15 Dec 2011

These are the yield movements for Thursday on benchmark 10 year bonds for some of the most watched sovereigns:

Italy 6.57% (-22.5bp)

Spain 5.43% (-25.6bp)

France 3.32% (- 10.6bp)

Germany 1.95% (+2.5bp)

U.S. 1.90% (+0.7bp)

U.K. 2.10% (+0.9bp)

Generally the bond market was less alarming than of recent times as the Spanish government managed to sell €6.028bn in 4 and 10 year debt.

The yields on the benchmark 10 year tranches were 5.239% and 5.545% - higher than the previous auction but not alarmingly so. The bid to cover ratio for the two tranches was 1.52 and 2.16 suggesting there is appetite for Spanish public debt.

The head of the Banque de France weighed in on the credit rating agencies which are threatening to take away France’s treasured AAA status. Chritian Noyer argued that, “a downgrade would not appear to be justified when considering economic fundamentals. Otherwise, they should start by downgrading the UK which has a larger deficit, just as much debt, more inflation and less growth than France.”

US Treasury notes held steady on news that the number of jobless claimants fell to 366,000 in the week ending December 10 from the previous reading of 385,000.

BS

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