http://www.telegraph.co.uk/finance/debt-crisis-live/9212980/Debt-crisis-Live.html
We are going to Washington for the Spring meetings and we have to wait to see what other countries think - this is a global deal.
Results from this month’s analysis of "fiscal space" by Moody’s Analytics suggests that ten-year bond yields in both Spain and Italy are now above levels that can be sustained, given the weakened state of the countries' public finances. Using current economic and demographic projections, and considering the government's behaviour regarding debt problems, we estimate that Spain can add to its public debt by the equivalent 97 percentage points of GDP before it becomes unmanageable, but borrowing costs above 5.7pc will significantly raise the chance of default.
The FTSE is up 0.29pc, the CAC is also 0.29pc higher and theDAX has risen 0.2pc. The IBEX is still in the red, down 0.47pc.It's a mixed auction. From the treasury's perspective, it is good, selling the maximum amount. The reason Bunds spiked and there might be some disappointment right now is that it priced slightly cheaper than the secondary market. But, given the market volatility, I would not read too much into this. It's job done for this round.
So, just how acute is the pain in Spain? We'll get an answer of sorts today as the country attempts to sell €2.5bn of bonds. Given the backdrop, a smooth, successful debt auction would come as something of a surprise.
13.09 Britain is holding back from commiting more cash to the IMF, despite Japan, Switzerland and Poland all pledging money this week. A Treasury official, speaking to Reuters, said:
We are going to Washington for the Spring meetings and we have to wait to see what other countries think - this is a global deal.12.50 It's been a volatile day for the euro. First the Spanish bond auction sent it temporarily spiking upwards, and now murmurs of a French downgrade have caused it to plummet. It reached a low of $1.3069 but is already edging back upwards.
12.41 As we mentioned earlier, Moody's has said that Italian and Spanish borrowing costs are unsustainable. Its monthly "fiscal space" analysis also showed that Italy would need to reduce its long-term borrowing costs to 4.2pc in order to return to a sustainable path.
11.43 Enam Ahmed, senior European economist at Moody’s Analytics, warns that if Italy and Spain have to suffer high bond yields for long then they'll face a high risk of default:
Results from this month’s analysis of "fiscal space" by Moody’s Analytics suggests that ten-year bond yields in both Spain and Italy are now above levels that can be sustained, given the weakened state of the countries' public finances. Using current economic and demographic projections, and considering the government's behaviour regarding debt problems, we estimate that Spain can add to its public debt by the equivalent 97 percentage points of GDP before it becomes unmanageable, but borrowing costs above 5.7pc will significantly raise the chance of default.10.26 France has also completed its bond auction, which was over-subscribed despite uncertainty over the upcoming election. It sold €3.5bn of two-year debt at an average yield of 0.85pc, €1.7bn of three-year debt for 1.06pc and €2.6bn of five-year debt for 1.83pc.
10.13 Markets haven't been moved far by the Spanish auction, although the euro spiked temporarily against the dollar, rising from $1.3151 to $1.3166, but slipping back to $1.3129.
The FTSE is up 0.29pc, the CAC is also 0.29pc higher and theDAX has risen 0.2pc. The IBEX is still in the red, down 0.47pc.09.59 Peter Chatwell, rate strategist at Credit Agricole, has commented on the Spanish bond auction:
It's a mixed auction. From the treasury's perspective, it is good, selling the maximum amount. The reason Bunds spiked and there might be some disappointment right now is that it priced slightly cheaper than the secondary market. But, given the market volatility, I would not read too much into this. It's job done for this round.09.45 Results from the Spanish bond auction are coming in: they reached their sales targets, but the average yield on ten-year debt was 5.743pc. At the last similar auction it was 5.403pc. For the two-year debt the average yield was 3.463pc, against 3.495pc at the last auction. So the cost of borrowing has risen for Spain but, crucially, they are below 6pc.
09.22 The City Briefing email has just landed in inboxes all around the world (sign up here), complete with a bit of background on the upcoming Spanish bond auction:
So, just how acute is the pain in Spain? We'll get an answer of sorts today as the country attempts to sell €2.5bn of bonds. Given the backdrop, a smooth, successful debt auction would come as something of a surprise.Earlier this month Spain fell short when it tried to sell €3.5bn of bonds. Fast forward a few days and things are looking even more shaky - the Spanish stock market tanked 4pc yesterday amid escalating concerns around the country's economy.
09.12 So, who's promised what towards the IMF's bailout 'firepower'? These figures are based on what we've heard so far, and tally with Christine Lagarde's claimed total of $320bn - which is some way short of her target of $400bn.
08.27 The Bank of England is currently going through the process of selecting a new Governor, which seems to have prompted David Blanchflower, who sat on the MPC from 2006 to 2009, to attack the incumbent. He dismissed Sir Mervyn King as a power-crazed "tyrant" and said that he was "unprepared for the crisis" that wrecked the world economy.
08.03 Tokyo stocks have closed 0.82pc down. As the Nikkei 225 opened data showed Japan had posted a record trade deficit for the year to March, with car exports down. Today's Spanish bond auction and the upcoming IMF meeting were also causing concerns. Earlier this week Japan itself pledged $60bn to the IMF. Masafumi Yamamoto, currency strategist at Barclays Capital, said:
06.53 As Ireland nears a referendum on the EU's fiscal pact treaty (it takes place on May 31), the Irish Times took a poll to measure the national mood: 30pc will back it, 23pc will not and 39pc are undecided. A further 8pc voted in the poll to say that they would not vote in the referendum.
No comments:
Post a Comment