The IS In PIIGS Issue Treasury Bills As Yields Jump, Interest Drops

Both Italy and Spain came to market this morning, pricing T-bills for E8.5 billion and nearly E2 billion, respectively. And while there was a divergence in bid to cover trends, yields surged across the board confirming that below the European surface not all is as well as the EURUSD would make most believe. Spain priced EUR 1.163 billion in 3-month T-Bills with a slightly improved bid/cover 4.43 vs. Prev. 4.33 although at a cost of a nearly 50% jump in yield or 1.37% versus 0.899% previously. This is the highest yield since December 2010. Spain also sold EUR 806MM in 6-month Bills at a bid/cover 7.11 vs. Prev. 7.65 with the yield surging as well, this time hitting 1.867% vs. Prev. 1.361%. Italy followed suit issuing EUR 8.5 billion in 6 month Bills, however at a lower bid/cover (reduced interest) of 1.432 vs. Prev. 1.61 despite the yield also jumping to 1.659% from 1.396%. Elsewhere the 3 and 6 month Euribor rate fixings continue to skyrocket, hitting 1.361% and 1.657% respectively. Thank you ECB for hiking rates. All this myopic action has done is to make the cost of short-term debt rolls prohibitively more expensive. Luckily, it will last about 3 months tops before Trichet, just like back in 2008, is forced to loosen once again (and yes, AU priced in EUR will be waiting).


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