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Spain Successfully Sells 10 And 13 Year Bonds Following Yield Spike; Key 5.6% Long End Level Held
Faced with a large capital funding need in advance of a substantial bond redemption next week, Spain had no choice but to hike rates on today's auction of €3.37 billion in 10 and 13 Year bonds. Spain auctioned off €2.49 billion in April 2021 bonds at a yield 5.472% vs. Prev. 5.162% (5.5% interest) at a 2.1 bid/cover Prev. 1.81. it also sold €0.885 billion in 2024 bonds yielding a whopping 5.667% vs. 4.26% previously. The jump in yield caused the bid/cover to rise to 2.3 vs. 1.84 before. From Reuters: "Ten-year Spanish yields eased to 5.46 percent after the sale, having risen to around 5.55 percent since late last week -- just 20 basis points shy of the euro lifetime high. The surge in yields had sparked concern that Spain was being dragged back into the crosshairs of investors looking for the next candidate for an international bailout. The auction was seen as a test of whether Madrid was still seen as insulated from Portugal, Greece and Ireland, which have sought help. ""Spain's debt servicing costs have ratcheted higher and, while not yet providing any cause for alarm in terms of their outright levels, arguably have little in the way of headroom before such concerns might begin to take effect," said Rabobank strategist Richard McGuire. Traders said the 5.6 percent level in 10-year Spanish bonds was key, although yields have failed to break above that level on a sustained basis to date. "If that goes it could turn very nasty," one trader said." Elsewhere both Portuguese and Greek 10 Years hits fresh lifetime highs (low prices), printing 9.5% and 14.68%, even as an oblivious euro surged to a fresh 18 month high.
Also this morning, Portugal sold its first post bailout debt: it auctioned off 3-month T-Bills for €0.68 billion at a bid/cover of 2.0 vs. 2.3 previously to come at a yield of 4.046% compared to 5.117% prior. It also sold 6-month T-Bills for €0.32bln, at a 3.7 bid/cover vs. 1.9 previously to yield 5.529% vs. 3.403% before.
More from Reuters:
Spain has to pay back 15.5 billion euros worth of bonds on April 30, along with almost 3 billion euros of coupon payments, according to Reuters data.
"There are decent redemption payments in the periphery in the next few weeks and the trend is that they coincide with bouts of volatility," said Nomura rate strategist Sean Maloney.
Renewed pressure on Greece to explore a debt restructuring, has rattled peripheral debt markets in recent sessions pushing Greek and Portuguese bond yields to new highs.
Greek two-year yields for example, have risen around 4.5 percentage points in the last week and five-year yields were another 20 bps higher on Wednesday.
Spain, Italy and Belgium had seemed to be decoupling from the weakness of Portugal, Greece and Ireland since mid-March but that move has faded as bond yields of the three bailed-out states surged, dragging bond yields of the more liquid peripheral issuers higher.
"Recent price action suggests that all periphery paper can remain under pressure," said Credit Agricole rate strategist Luca Jellinek.
"However, as we have experienced since late last year, fundamentals also matter and on that front the situation is less unforgiving for Spain and Italy."
The better tone in parts of the periphery pushed June Bund futures 35 ticks lower at 121.82.
Two-year German bond yields were 5 bps higher at 1.848 percent, with 10-year yields up 4 bps at 3.317 percent, but still around 20 bps lower than a week ago when the yields failed to break through 3.5 percent.
"If we can get back above 3.33 percent -- the previous double top and a bit of a pivot point -- then we'll probably see another sell-off," a trader said.
Investors seeking safety from the renewed bout of peripheral stresses helped Germany sell 4.74 billion euros of a new 5-year bond with a bid/cover ratio of 1.9, compared with an average of 1.66 at the previous 3 sales of 5-year paper in 2011.
Elsewhere the BOE which said while it was "hard to know how to interpret March CPI Fall, still significant risk CPI will exceed 5% in near term", it made it clear any rate hike by the central bank would likely be delayed. From Market News:
Barclays, Citi Group's and Nomura's UK economics teams have pushed back their rate calls from May to the summer following the release of the minutes of the April Bank of England Monetary Policy Committee meeting Wednesday.
In recent weeks a number of high profile economics team have pushed back their predictions for the fist BOE MPC rate hike from May to August, and the April minutes have added to that group.
Philip Rush and Peter Westaway of Nomura said in a note that the minutes struck a less hawkish tone than in March. While the MPC vote split was unchanged the remarks from the no change camp gave no indication any of them were leaning to a near term hike.
"Crucially for our call, the statement in the minutes (in March) that 'others thought... that the case for an increase in Bank Rate had strengthened in recent months' was removed from the text. We were surprised by this as, in our opinion, the upside inflationary news more than offsets the soft CPI data that the MPC saw under embargo," the Nomura team said.
RBS, BNP Paribas and JP Morgan have recently pushed their rate calls back from May to August.
All this is merely adding to EUR strength, making life for Europe that much more difficult, although per the G-7 agreement, Europe has to take one for the team, and hope that a spike in capital markets in sympathy with the US will be enough to offset the plunge in exports.
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Spain is in default...
that is true I guess.
Damn you guys noticing some storms coming over your place.
I just Had a look at the FFT guys. And they are predicting a big set of tornados to come.
http://www.forecastfortomorrow.com/news/2011/04/tornado-season-look-out/
They have been VERY SPOT ON in the past...and say : "Expect it to be very bad over the next couple of days in the US mid-west, south and maybe even up toward the Canadian borders. At least one F-5 will come out of this, maybe more than one"
Stay safe people. MIght get rough.
Hedge Funds must attack and destroy Spanish Debt then Equities will plunge and this farce system will end.
Then hedge funds have zero incentive to do said things. A parasite killing it's host is a doomed parasite.
Insane - wonder how many people were caught in the bear trap on monday's epic fall - only to have their ass handed to them in yesterday's and tonights overnight run.
EURUSD = the vomit trade.
Agree FirstD.
What i mean, its nobody in the financial market trust these figures. Spain Real Estate Losses are close to 400.000 Mn Euros, So whole Saving Banks and Banks are kaput, then is gonna be impossible to pay nothing, cos we dont generate a penny.
Haircuts are inminent all across the board, and thats DILUTIVE for banking and Insurers.
Greece will suffer 70%, just take a look to Greek 30 yrs Bonds.
Spanish Effective 10yrs bond is not 5.6% is 9% and at 7.01% (the trigger) all the Euro system will dissapear into Gold/silver/platinium/palladium commodity linked basket. Euro is a farce.
But again the problem is not Greece,Portugal or Ireland is SPAIN...and i can assure u we are in default. No employment growth, less salaries, this country is a mess, but smokescreen is our best practice
And a little look under the hood reveals interesting things. For example Spanish autonomous communities' debt mountain keeps climbing and is on an exponential growth path. According to Bank of Spain statistics the debt load in 2000 was roughly 39,5 bn, in 2005 it was 56,8 bn and at the end of 2010 it stood at 115,5 bn. Wonder what these figures really are since the figures mentioned here are according to the excessive deficit procedure (ie euro-ponzi compliant)...
this will be put on the back burner....costs going up..revenues going down...its toast...but when this all fails no one knows...its all APPLE today....
called this rally last night based on strong april returns: http://www.hedgefundlive.com/blog/its-april-time-for-the-market-to-rally
China is appearing as the savior of the Euro (i.e., Europe) as well as the economic engine for LatAm development. The US is rapidly losing its influence in the Western Christian world to China. The Russians, Chinese will work with any potential friend or adversary of ours to undermine us. We have had traitors and idiots guiding our country now for over 30 years.
Hernando..you are right...I live in Colombia..the Chinese are here building apartments and parks for the people...to get their foot in the door so they can buy all the commodities that Colombia has....to me that is their end game...control the commodities...and the Chinese people can grow...they think long term...not the next election process like we are already in....two years out...what a joke
Spain Real Estate Losses are close to 400.000 Mn Euros, So whole Saving Banks and Banks are kaput, then is gonna be impossible to pay nothing, cos we dont generate a penny.
I wish that figure was true. Surely a typo?