Bonds sale eases Spain debt fears
By Paul Day and Noah Barkin |
April 21, 2011, Thursday
|
Print Edition
Print Edition
SPAIN attracted solid demand at a bond sale yesterday, easing concerns it could be swept up by the contagion hitting other eurozone countries, but worries about Greek debt continued to haunt the bloc.
In a reminder of the rising political obstacles to solving the eurozone's debt crisis, a member of German Chancellor Angela Merkel's party said he would try to block plans to create a new financial safety net for the 17-nation currency area.
That threat came days after an anti-euro party scored strong gains in a Finnish election, stoking fears of a veto of Portugal's pending bailout.
Rising expectations that Greece will have to restructure its 325 billion euros (US$468 billion) mountain of debt have weighed on the bloc in recent days, raising doubts about whether policymakers can restore confidence in their bold 12-year-old currency experiment.
The cost of insuring Greek five-year government debt shot up to a record high amid worries it could end up forcing "haircuts," or losses, on the holders of its debt to reduce its burden.
Madrid's debt sale temporarily alleviated another of European leaders' worst fears - that Spain, with an economy roughly twice as big as those of Greece, Ireland and Portugal combined, could become the next target for investors, stretching the bloc's rescue funds to breaking point.
Spain's Treasury sold 3.4 billion euros of bonds maturing in 2021 and 2024 yesterday, near the top end of their target range.
Average yields on the 10-year bond rose to 5.472 percent from 5.162 percent in the last auction, reflecting the recent rise in Spanish long-term rates in the secondary market.
But demand was solid, outstripping what was on offer by 2.1 times, up from 1.8 previously.
"Spain is not completely disconnected from the concerns about the periphery but in a yield-hungry world there are plenty of investors that want to lock in these relatively attractive yields," said Marc Ostwald, a strategist at Monument Securities.
The euro, helped by expectations of further interest rate rises by the European Central Bank, pushed up to a 15-month high against the dollar after the Spanish auction, which coincided with debt sales in Germany and Portugal.
An auction of 4.74 billion euros in new five-year German bonds went smoothly and Lisbon, which is in the midst of talks with EU and IMF officials on an 80 billion euro rescue, saw yields rise in a 1 billion euro treasury bill sale.
Opposition to further aid is particularly acute in northern Europe, where many taxpayers are furious at the prospect of helping southern countries that mismanaged their economies and finances for years.
In a reminder of the rising political obstacles to solving the eurozone's debt crisis, a member of German Chancellor Angela Merkel's party said he would try to block plans to create a new financial safety net for the 17-nation currency area.
That threat came days after an anti-euro party scored strong gains in a Finnish election, stoking fears of a veto of Portugal's pending bailout.
Rising expectations that Greece will have to restructure its 325 billion euros (US$468 billion) mountain of debt have weighed on the bloc in recent days, raising doubts about whether policymakers can restore confidence in their bold 12-year-old currency experiment.
The cost of insuring Greek five-year government debt shot up to a record high amid worries it could end up forcing "haircuts," or losses, on the holders of its debt to reduce its burden.
Madrid's debt sale temporarily alleviated another of European leaders' worst fears - that Spain, with an economy roughly twice as big as those of Greece, Ireland and Portugal combined, could become the next target for investors, stretching the bloc's rescue funds to breaking point.
Spain's Treasury sold 3.4 billion euros of bonds maturing in 2021 and 2024 yesterday, near the top end of their target range.
Average yields on the 10-year bond rose to 5.472 percent from 5.162 percent in the last auction, reflecting the recent rise in Spanish long-term rates in the secondary market.
But demand was solid, outstripping what was on offer by 2.1 times, up from 1.8 previously.
"Spain is not completely disconnected from the concerns about the periphery but in a yield-hungry world there are plenty of investors that want to lock in these relatively attractive yields," said Marc Ostwald, a strategist at Monument Securities.
The euro, helped by expectations of further interest rate rises by the European Central Bank, pushed up to a 15-month high against the dollar after the Spanish auction, which coincided with debt sales in Germany and Portugal.
An auction of 4.74 billion euros in new five-year German bonds went smoothly and Lisbon, which is in the midst of talks with EU and IMF officials on an 80 billion euro rescue, saw yields rise in a 1 billion euro treasury bill sale.
Opposition to further aid is particularly acute in northern Europe, where many taxpayers are furious at the prospect of helping southern countries that mismanaged their economies and finances for years.
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