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EURO GOVT-Spanish bonds under pressure before auction
Thu Sep 1, 2011 4:20am EDT
(Adds quotes)
By Ana Nicolaci da Costa
LONDON, Sept 1 (Reuters) - Spanish government bonds fell on Thursday ahead of a sale of new 5-year debt, while weak manufacturing data from the euro zone helped German bonds, seen as a safe haven by investors, to recover early losses.
Spain will test market appetite for its bonds at its first auction since the ECB started buying Spanish and Italian debt last month in a bid to halt the spread of the euro zone's debt crisis.
A sale of Italy's bonds this week saw only relatively weak demand, reigniting concerns about market pressure on two of the currency bloc's biggest economies.
A key business survey showed euro zone manufacturing activity contracted for the first time in almost two years in August, adding to worries that at least some countries may slide back into recession. .
"Our view is that the situation in Europe is not stable enough, so in that sense we expect market sentiment to deteriorate again," Elwin de Groot, senior market economist at Rabobank said.
"We still have the collateral issue with Finland being unresolved, we still have the EFSF plans that need to be (approved) and we have the latest developments in Italy which are also not very positive for market sentiment."
The Italian government backtracked on parts of its widely criticised austerity package on Monday. Analysts also fear a row over Finland's deal with Greece to obtain collateral in exchange for loans could jeopardise a second Greek bailout. .
German Chancellor Angela Merkel's cabinet approved new powers for the euro zone's bailout fund on Wednesday, but some members of her centre-right coalition are threatening to oppose such a boost when the Bundestag (lower house) votes on Sept. 29. .
The German Bund future FGBLc1 was up 7 ticks on the day at 134.65, having opened down 31 ticks.
"We will closely monitor the auction (from) Spain," a trader in Germany said. "I think it will be like the Italian auction, not very convincing but not very depressing."
Ahead of the auction, 5-year bonds traded slightly lower in the secondary market, with yields up 5.5 basis points at 4.33 percent.
Ten-year Spanish yields rose 5.5 basis points at 5.11 percent, while the Italian equivalent gained 3.4 basis points at 5.18 percent.
France wraps up the week's supply with an auction of 6.5-8 billion euros of fixed-rate five-, 10- and 30-year bonds -- the first non-German triple-A rated paper to be sold since late July.
"We are confident that today's auctions, especially the Spanish one, will be well received courtesy of the ECB as it attempts to keep 'control' of the country's yields, hence maintaining refinancing levels at sustainable levels," Lloyds bank said in a research note.
U.S. OUTLOOK
After the Spanish auction, attention is likely to turn to the United States where recent mixed data raised hopes that the world's largest economy could dodge a recession.
The U.S. Institute for Supply Management's national manufacturing index is due later on Thursday, followed by a key U.S. employment report on Friday.
Investors will keep a close eye on the data to try to assess if the U.S. central bank could opt for a third round of quantitative easing after Fed minutes this week showed the central bank in early August had discussed a range of unusual tools it could use to help the economy.
De Groot said more evidence was needed to say that the U.S. economy had avoided a recession.
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Un'occhiata ai bond dell'eurozona.
Thu Sep 1, 2011 4:20am EDT
(Adds quotes)
By Ana Nicolaci da Costa
LONDON, Sept 1 (Reuters) - Spanish government bonds fell on Thursday ahead of a sale of new 5-year debt, while weak manufacturing data from the euro zone helped German bonds, seen as a safe haven by investors, to recover early losses.
Spain will test market appetite for its bonds at its first auction since the ECB started buying Spanish and Italian debt last month in a bid to halt the spread of the euro zone's debt crisis.
A sale of Italy's bonds this week saw only relatively weak demand, reigniting concerns about market pressure on two of the currency bloc's biggest economies.
A key business survey showed euro zone manufacturing activity contracted for the first time in almost two years in August, adding to worries that at least some countries may slide back into recession. .
"Our view is that the situation in Europe is not stable enough, so in that sense we expect market sentiment to deteriorate again," Elwin de Groot, senior market economist at Rabobank said.
"We still have the collateral issue with Finland being unresolved, we still have the EFSF plans that need to be (approved) and we have the latest developments in Italy which are also not very positive for market sentiment."
The Italian government backtracked on parts of its widely criticised austerity package on Monday. Analysts also fear a row over Finland's deal with Greece to obtain collateral in exchange for loans could jeopardise a second Greek bailout. .
German Chancellor Angela Merkel's cabinet approved new powers for the euro zone's bailout fund on Wednesday, but some members of her centre-right coalition are threatening to oppose such a boost when the Bundestag (lower house) votes on Sept. 29. .
The German Bund future FGBLc1 was up 7 ticks on the day at 134.65, having opened down 31 ticks.
"We will closely monitor the auction (from) Spain," a trader in Germany said. "I think it will be like the Italian auction, not very convincing but not very depressing."
Ahead of the auction, 5-year bonds traded slightly lower in the secondary market, with yields up 5.5 basis points at 4.33 percent.
Ten-year Spanish yields rose 5.5 basis points at 5.11 percent, while the Italian equivalent gained 3.4 basis points at 5.18 percent.
France wraps up the week's supply with an auction of 6.5-8 billion euros of fixed-rate five-, 10- and 30-year bonds -- the first non-German triple-A rated paper to be sold since late July.
"We are confident that today's auctions, especially the Spanish one, will be well received courtesy of the ECB as it attempts to keep 'control' of the country's yields, hence maintaining refinancing levels at sustainable levels," Lloyds bank said in a research note.
U.S. OUTLOOK
After the Spanish auction, attention is likely to turn to the United States where recent mixed data raised hopes that the world's largest economy could dodge a recession.
The U.S. Institute for Supply Management's national manufacturing index is due later on Thursday, followed by a key U.S. employment report on Friday.
Investors will keep a close eye on the data to try to assess if the U.S. central bank could opt for a third round of quantitative easing after Fed minutes this week showed the central bank in early August had discussed a range of unusual tools it could use to help the economy.
De Groot said more evidence was needed to say that the U.S. economy had avoided a recession.
***
Un'occhiata ai bond dell'eurozona.
