Posts Tagged ‘Spain’

Spain Begins to Echo Greece

June 16th, 2010 Michael McDonough Comments off

The spreads for Europe’s economically weak peripheries over equivalent German bonds—the European benchmark—continue to approach their pre-bailout highs.  The 10Y spread in Spain again reached record levels amidst rumors that IMF, EU and the U.S. Treasury may be creating a EUR250bn credit line for the country (so far the EU and the Treasury department have denied the report).  This coming Friday the head of the IMF, Dominique Strauss-Khan, is scheduled to meet with Spanish Prime Minister to discuss, “structural reform measures the government is undertaking, the labour reform to be approved tomorrow by the cabinet, and other measures to tackle the deficit, as well as measures by other countries and other economic zones.”  Spanish officials have indicated that these meetings were scheduled prior to reports of a Spanish bailout.  But, in the minds of some investors this visit is too coincidental, echoing a similar visit by the IMF to Greece just prior to that country’s own demise. 

Amidst this strife, Spain is expected to auction 10Y and 30Y government bonds tomorrow totaling an estimated EUR3.5bn.  This auction will be watched closely by investors, and any signs of weakness could spell trouble for Spain, Europe and any global risk correlated assets.  Here is a complete list from Barclays of expected European bond auctions for the remainder of the week:

Date            Country     Bond                                       Amount (EURbn)

17-Jun-10     Spain        10y SPGB (total range €2-3.5bn)    2.00

17-Jun-10     Spain        30y SPGB (total range €2-3.5bn)    1.50

17-Jun-10     France      2yr BTAN (range €6.5-8bn)              2.00

17-Jun-10     France      3yr BTAN (range €6.5-8bn)              2.00

17-Jun-10     France      New 5yr BTAN (range €6.5-8bn)     4.00

17-Jun-10     UK            2014 Gilt tap                                     4.00

17-Jun-10     France     OATi Auction (range €1.3-1.8bn)      0.50

17-Jun-10     France     OATei Auction (range €1.3-1.8bn)    0.40

17-Jun-10     France     OATi Auction (range €1.3-1.8bn)      0.70

Categories: Europe Tags: , ,

Risk Makes a Comeback

June 14th, 2010 Michael McDonough Comments off

Investors are feeling more at ease with the uncertainty facing global market.  The AUD/JPY exchange rate—a popular FX carry trade and risk metric—has moved off of its recent lows of less than 74 to a level of 79.4.  At the same time, 3M LIBOR halted its climb, and has remained fairly steady around 0.54%, albeit still more than double early March levels.  Investors growing appetite for risk partially stems from a successful Spanish three year government bond auction last week, which received a surprisingly strong bid to cover of 2.1, while still yielding an elevated 3.3%–compared to less than 2% for bonds of a similar duration in March.  Spain is scheduled to reopen EUR3.5bn of 10Y and 30Y bonds on June 17th.  With a relatively quiet week on the data front—barring the auctions in Spain and a European summit on Thursday—traders will likely continue adding on risk, pushing European spreads down; US Treasury yields up, all boding well for growth correlated assets, including equities.   

Source: Bloomberg

Categories: Europe, US Tags: , , , ,

This Week’s Critical Government Bond Auctions, & Worries for Spain

June 8th, 2010 Michael McDonough Comments off

Keep an eye on these government bond auctions, especially for Spain and Portugal, as a bad auction can provide the catalyst for further risk aversion:

June 9th:
09:00 GMT Germany: 2y Schatz Auction €6bn
09:30 GMT Portugal: 3y and 10y auctions €1.5bn
09:30 GMT UK: New 2020 Gilt £3.75bn
17:00 GMT US: 10y Note Auction $21bn

June 10th:
02:00 GMT Japan: 5y JGB Auction ¥2400bn
08:30 GMT Spain: New 3y SPGB Auction €4.5bn
17:00 GMT US: 30y Bond Auction $13bn

June 11th:
09:00 GMT Italy: 5y and long end BTP Auctions €7bn

*Data compiled by Barclays

Spain has a signiifcant amount of debt coming due in July, which won’t go unnoticed by investors, especially if their upcoming auctions fair worse than expected:

Source: Bloomberg