Posts Tagged ‘Bond issues’

Solid demand for bond issues by Spain, Portugal and Italy boost Euro

January 13, 2011
The euro sign; logotype and handwritten.

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The countries are considered among those dragging down the Eurozone but strong demand for Portugese bonds on Wednesday was followed by solid demand for those issued by Spain and Italy today. Earlier this week both Japan and China had pledged to buy the bonds in Europe. Both countries have large cash reserves and are probably attracted by the higher yields but are also making a political statement in supporting the Eurozone. China is on a charm offensive and wishes to be seen to be reaching out to Greece and Portugal.


Spain has raised 3bn euros ($3.9bn; £2.5bn) in an auction of five-year government bonds. The average yield on the bonds was 4.542%, which was nearly one percentage point higher than the rate reached in the last auction in November. However, analysts had feared the yield would be even higher.

The debt sale, which follows a similar auction by Portugal on Wednesday, is soothing fears over the eurozone’s ability to service its debts. Michael Lister, strategist at West LB in Dusseldorf, said: “The figures look really good, it’s the perfect sequel to the Portugal auction yesterday.”

Wall Street Journal:

The Hong Kong dollar rose against the U.S. dollar Thursday as a successful bond auction in Portugal helped ease concerns about the euro zone’s debt problems, encouraging investors to shift funds from the U.S. currency to riskier assets.

Traders said gains in the local stock market will continue to boost demand for the Hong Kong dollar. They said they expect the U.S. dollar to trade between HK$7.7720 and HK$7.7780 Friday.

“Portugal’s bond auction temporarily eased concerns over European debt. Also, the U.S. dollar isn’t likely rise sharply ahead of (Chinese) President Hu Jintao’s visit to the U.S. next week,” said a senior trader at a Chinese bank. Hu plans to meet U.S. President Barack Obama in Washington on Jan. 19.

The Portuguese government sold EUR1.25 billion worth of bonds in an auction overnight, offering good news to investors worried an unsuccessful bond sale could signal tougher austerity measures in parts of the euro zone.

Financial Times:

Spain and Italy on Thursday followed Portugal by holding successful bond auctions, providing a glimmer of optimism in the eurozone debt crisis. Italy sold €6bn of five-year and 15-year debt while Spain issued €3bn in five-year bonds, but both countries were forced to pay higher interest rates than in previous auctions.

The three successful auctions this week from peripheral eurozone countries provide a small amount of breathing room in the crisis. But the elevated yields paid by all of them and their high funding needs mean that investors are still waiting for decisive action from European policymakers.

Italy sold €3bn of 15-year bonds at a yield of 5.06 per cent, up from 4.81 per cent at a previous auction in November. Likewise, the yield on €3bn of five-year debt rose from 3.24 per cent two months ago to 3.67 per cent. Both auctions were fully covered. Spain paid almost a percentage point more than it did in November with a five-year yield of 4.54 per cent.

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