Europe Stay updated with Business News, Pakistan news, Current world news and latest world news with Business Recorder.. http://www.brecorder.com/markets/fixed-income/europe.html Wed, 28 Jan 2015 14:10:14 +0000 SRA Framework 2.0 en-gb Greek 5-year yields hit record high on concerns over anti-bailout cabinet http://www.brecorder.com/markets/fixed-income/europe/220467-greek-5-year-yields-hit-record-high-on-concerns-over-anti-bailout-cabinet.html http://www.brecorder.com/markets/fixed-income/europe/220467-greek-5-year-yields-hit-record-high-on-concerns-over-anti-bailout-cabinet.html imageLONDON: Greek five-year yields jumped to record highs on Wednesday as investor concerns that the new anti-bailout government in Athens was squaring up for a clash with international creditors rocked the country's markets.

Prime Minister Alexis Tsipras chaired his first cabinet meeting on Wednesday after appointing a team of anti-austerity ministers and halting privatisation of Greece's biggest port, agreed under its 240-billion-euro international bailout.

Markets took this as another signal that he intends to stick to election pledges to scrap the bailout, abandon austerity and renegotiate Greek's debt pile despite warnings from European Union officials and the International Monetary Fund.

Greek five-year yields jumped 117 basis points to 13.12 percent, an all-time high, while three-year yields were 189 bps higher at 16.09 percent, close to record highs and 10-year yields were up 54 bps at 10.33 percent.

Shorter-dated yields extended their gap over longer-term ones, reflecting increasing investor concern that they may not get all their money back.

"It's a continuation of what we've seen in the past few days. Now Tsipras has announced his new cabinet and his new finance minister seems to be a rough guy from the very far left of the political spectrum," said Felix Herrmann, a market strategist at DZ Bank.

"This is raising fears that there's a clash coming up between Athens and its lenders. The fact that he joined a coalition with the far right is not helping either."

Other peripheral euro zone bond yields also rose, with Portuguese 10-year yields 10 bps higher at 2.31 percent while Spanish and Italian equivalents were 6 bps up at 1.45 percent and 1.59 percent respectively. They all pulled further away from record lows hit last week after the European Central Bank announced its quantitative easing programme.

TEMPORARY SELLOFF

Analysts said any backup in peripheral euro zone bond yields except Greece provided a buying opportunity before the European Central Bank starts buying sovereign bonds in March.

"We see temporary (yield spread) re-widening corrections as an opportunity to position for tighter spreads going into QE," BNP Paribas strategists said in a note.

German yields, the benchmark for euro zone borrowing costs, were up 2 bps at 0.39 percent after a survey showed consumer confidence was growing in Europe's biggest economy and before a sale of 31-year bonds in Berlin.

Germany will sell up to 2 billion euros of 31-year bonds later in the day, which falls just outside the ECB's surprising decision to include 30-year paper in its shopping list of sovereign bonds. Yields on 30-year euro zone bonds hit record lows across the credit spectrum, with those on German paper tumbling just below 1 percent as investors seeking to maximise returns moved up the yield curve.

Longer-dated paper lagged the rally and some analysts said it looked relatively cheaper to the 30-year paper and may lure investors such as pension or insurance funds looking for a bit of a yield pick-up.

Copyright Reuters, 2015

]]>
imad_kueconomist@yahoo.com (Imaduddin) Europe Wed, 28 Jan 2015 12:08:50 +0000
Ten-year gilt prices rally on downbeat global economic data http://www.brecorder.com/markets/fixed-income/europe/220186-ten-year-gilt-prices-rally-on-downbeat-global-economic-data.html http://www.brecorder.com/markets/fixed-income/europe/220186-ten-year-gilt-prices-rally-on-downbeat-global-economic-data.html imageLONDON: Ten-year gilt prices rose strongly on Tuesday following some downbeat economic data, particularly from the United States, that prompted a rally in safe-haven government bonds.

By 1620 GMT the 10-year gilt yield was down around 3.5 basis points on the day at 1.48 percent, as the bond outperformed equivalent German debt but trailed behind surging U.S. Treasuries.

Gilts wavered following weaker-than-expected British economic growth data for the fourth quarter, but rallied strongly following after a gauge of U.S. business investment plans unexpectedly fell.

The yield spread between 10-year gilts and the equivalent German Bund tightened by more than a basis points on the day to 110 basis points.

On Wednesday, Britain's Debt Management Office is widely expected to hold a sale via syndication of the 0.125 percent 2058 index-linked gilt.

ADM Investor Services strategist Marc Ostwald said in a note to clients that pension funds would by forced to buy the bonds because of duration index extensions, even though buying them could be seen as a form of "insanity" with such negative real yields.

Copyright Reuters, 2015

]]>
imad_kueconomist@yahoo.com (Imaduddin) Europe Tue, 27 Jan 2015 16:44:59 +0000
Italy to offer up to 8.25bn euros of CCTEU, BTP at auction http://www.brecorder.com/markets/fixed-income/europe/219924-italy-to-offer-up-to-825bn-euros-of-ccteu-btp-at-auction.html http://www.brecorder.com/markets/fixed-income/europe/219924-italy-to-offer-up-to-825bn-euros-of-ccteu-btp-at-auction.html imageROME: Italy's Treasury said on Monday it would issue up to 8.25 billion euros ($9.32 billion) of floating-rate notes linked to euro-zone inflation (CCTEU), and fixed-rate bonds (BTP) at its regular end-month auction on Jan. 29. The Treasury said in a statement it would offer:

Between 1.25 billion euros and 1.75 billion euros of a 9th tranche CCTEU maturing on Dec. 15, 2020.

Between 2.5 billion euros and 3 billion euros of a 5th tranche BTP with a 1.05 percent coupon, maturing on Dec. 1, 2019.

Between 3 billion euros and 3.5 billion euros of an 11th tranche BTP with a 2.5 percent coupon, maturing on Dec. 1, 2024.

Copyright Reuters, 2015

]]>
s.rs96@yahoo.com (Shoaib-ur-Rehman Siddiqui) Europe Mon, 26 Jan 2015 20:47:56 +0000
Italy to issue 7bn euros of BOTs at end-month auction http://www.brecorder.com/markets/fixed-income/europe/219382-italy-to-issue-7bn-euros-of-bots-at-end-month-auction.html http://www.brecorder.com/markets/fixed-income/europe/219382-italy-to-issue-7bn-euros-of-bots-at-end-month-auction.html imageROME: The Italian Treasury said on Friday it would offer seven billion euros of first tranche, 6-month Treasury bills (BOTs) at its regular end-month auction on Jan. 28.

The BOTs will mature on July 31, 2015.

Copyright Reuters, 2015

]]>
s.rs96@yahoo.com (Shoaib-ur-Rehman Siddiqui) Europe Fri, 23 Jan 2015 19:48:26 +0000
Portugal 2014 public deficit falls 20pc, beats target http://www.brecorder.com/markets/fixed-income/europe/219365-portugal-2014-public-deficit-falls-20pc-beats-target.html http://www.brecorder.com/markets/fixed-income/europe/219365-portugal-2014-public-deficit-falls-20pc-beats-target.html imageLISBON: Portugal's public deficit shrank by 20 percent to 7.07 billion euros ($8 billion) last year as spending fell and tax revenues hit a record high, to beat the government's deficit estimate by 655 million euros, the finance ministry said on Friday.

The primary public balance, which excludes debt interest payments, swung to a surplus of 1.03 billion euros from a deficit of 882 million euros a year earlier, the ministry said.

Tax revenues rose 2.3 percent to a record 37.1 billion euros.

The government said it cut spending by 1.2 billion euros last year.

Portugal ended its 2011 bailout from the European Union and the International Monetary Fund in May, but is still working to bring down its debts and deficit as a percentage of gross domestic product.

The budget deficit target for last year was 4 percent of GDP excluding one-off loans to public transport companies.

The government has pledged to keep a tight budget and cut the deficit below 3 percent this year.

Copyright Reuters, 2015

]]>
s.rs96@yahoo.com (Shoaib-ur-Rehman Siddiqui) Europe Fri, 23 Jan 2015 19:30:21 +0000
German bond yields rise on worries QE might end 16-month rally http://www.brecorder.com/markets/fixed-income/europe/218853-german-bond-yields-rise-on-worries-qe-might-end-16-month-rally.html http://www.brecorder.com/markets/fixed-income/europe/218853-german-bond-yields-rise-on-worries-qe-might-end-16-month-rally.html imageLONDON: German 10-year bond yields rose on Thursday, as investors weighed up whether a 16-month rally in the top-rated debt can continue after the ECB launches a much-anticipated bond-buying scheme.

After the biggest daily jump in more than a year on Wednesday, German yields -- the bloc's benchmark -- climbed further away from historic lows, as markets waited eagerly for confirmation that the ECB would follow the path of other major central banks into quantitative easing.

Lower-rated debt in the bloc's southern periphery outperformed the German benchmark, as investors predicted their high yields would converge further under QE.

German 10-year yields rose 4 basis points to 0.50 percent, off lows of 0.38 percent hit on Tuesday, while Italian and Spanish equivalents dipped 1 bps to 1.69 and 1.54 percent, respectively.

"Certainly our bias is that we like peripheral debt so any weakness in peripheral debt could be a buying opportunity," said Nick Gartside, chief investment officer at JP Morgan Asset Management.

German yields have fallen from peaks of over 4.5 percent in 2008, with the latest downward push starting in September 2013.

Some analysts predict that German yields will start to rise further as QE boosts rock-bottom inflation expectations, while others say even large-scale bond buying will struggle to offset the drag of low oil prices.

SEA OF TEARS

It is the size and structure of QE that is now the focus of attention, with European Central Bank President Mario Draghi likely to offer some compromise to the hawkish, northern European members of his council. The press conference starts at 1330 GMT.

"Whether the press conference ends in a sea of tears ... will probably ultimately depend on the details of the programme," said DZ Bank strategist Christian Lenk.

A euro zone source said on Wednesday that the ECB's Executive Board, which met on Tuesday, has proposed the bank should buy 50 billion euros ($58 billion) in bonds per month starting from March.

Uncertainty surrounds the proposed programme's duration, however. The Wall Street Journal reported it would last a minimum of one year while Bloomberg said the purchases would run until the end of 2016. The ECB declined to comment on any of the reports.

The duration is significant. A programme starting in March and running for a year would total about 600 billion euros. If it ran until the end of 2016, it could surpass 1 trillion euros.

"Woe betide the ECB if it disappoints expectations," said Rabobank in a note, quoting Roman poet Horace who wrote, "Once a word has been allowed to escape, it cannot be recalled."

There are also questions about whether the scheme will include Greece, which looks set to elect a left-leaning government on Sunday that has been campaigning for debt relief and an end to austerity.

The main ratings agencies said any exclusion of Greece's debt could hurt its recently upgraded credit rating.

Greek borrowing costs inched down a fraction on Thursday, but yields on shorter-dated bonds remain sharply above longer-dated equivalents -- a sign that investors fear the country could be on the verge of default.

Copyright Reuters, 2015

]]>
imad_kueconomist@yahoo.com (Imaduddin) Europe Thu, 22 Jan 2015 12:09:08 +0000
ECB to decide on bond-buying plan to revive euro zone http://www.brecorder.com/markets/fixed-income/europe/218842-ecb-to-decide-on-bond-buying-plan-to-revive-euro-zone.html http://www.brecorder.com/markets/fixed-income/europe/218842-ecb-to-decide-on-bond-buying-plan-to-revive-euro-zone.html imageFRANKFURT: The European Central Bank is poised to announce a plan on Thursday to buy government bonds, resorting to its last big policy option for breathing life into the flagging euro zone economy.

Market expectations are sky-high for the ECB to unveil large-scale quantitative easing (QE) - printing money to buy government bonds - despite opposition from Germany's Bundesbank and concerns in Berlin that this could allow spendthrift countries to slacken economic reforms.

The momentous step - which comes as global economic prospects dim - has already prompted the Swiss central bank to abandon its cap on the franc, while Denmark, whose currency is pegged to the euro, was forced to cut interest rates in anticipation of the flood of money.

Canada has cut the cost of borrowing while two British rate setters at the Bank of England have dropped calls for tighter monetary policy.

A euro zone source has said that the ECB's Executive Board has proposed that it buy 50 billion euros ($58 billion) in bonds per month from March.

The broader, 25-member policymaking Governing Council began meeting at 0800 GMT on Thursday to discuss the proposal. ECB President Mario Draghi holds a news conference at 1330 GMT.

Former ECB policymaker Athanasios Orphanides said action was long overdue. "The ECB should have already embarked on QE," he said. "Now that the situation has deteriorated, the ECB will have to do much more."

There is uncertainty, however, about the length of the programme. While some media predicted that it would run until the end of next year, it could possibly be cut short or extended depending on whether or not it is having an impact on the euro zone economy.

The duration is significant. A programme starting in March and running for a year would total about 600 billion euros, based on a purchase rate of 50 billion per month. If a similar plan ran until the end of 2016, it could surpass 1 trillion euros.

Money market traders polled by Reuters expected a 600-billion-euro bond-buying plan.

Euro zone inflation turned negative last month; consumer prices fell 0.2 percent, far below the ECB's target that they should rise just under 2 percent annually.

But there are doubts, and not only in Germany, over whether printing fresh money will work.

"It is a mistake to suppose that QE is a panacea in Europe or that it will be sufficient," former U.S. Treasury Secretary Larry Summers said at the World Economic Forum in Davos on Thursday.

"There is every reason to expect that QE will be less impactful in a context like the present one in Europe than it was in the context of the United States."

Scepticism runs deep among Germans and their Dutch neighbours, who fear that it will see their strong economic standing used to sponsor weaker southern states such as Portugal with cheap finance via the ECB.

Earlier this week, tensions boiled over in a debate at the Dutch parliament, where a majority of political parties said they opposed quantitative easing if it would "lead to an increased risk of redistributing financial risks between euro member states".

Copyright Reuters, 2015

]]>
imad_kueconomist@yahoo.com (Imaduddin) Europe Thu, 22 Jan 2015 11:53:56 +0000
German bond yields hit record lows after Swiss cap shock http://www.brecorder.com/markets/fixed-income/europe/217889-german-bond-yields-hit-record-lows-after-swiss-cap-shock.html http://www.brecorder.com/markets/fixed-income/europe/217889-german-bond-yields-hit-record-lows-after-swiss-cap-shock.html imageLONDON: German bond yields hit new lows on Friday as investors parked money in safe, top-rated debt as the shock of the Swiss National Bank scrapping its currency cap continued to wash over markets.

The 10-year benchmark dropped below 0.40 percent for the first time, while yields on U.S. Treasuries and UK Gilts also fell after the SNB stunned markets on Thursday by abandoning its pledge to keep the franc above 1.20 per euro.

Bond brokers said police raids against suspected militants in Belgium and a request from two Greek banks for emergency funding had also rattled investors, forcing them to take refuge in risk-free assets.

There was little sign of stress on low-rated euro zone government bonds, however, with analysts suggesting the Swiss move meant it was almost certain the European Central Bank would ease monetary conditions via quantitative easing next week.

"The SNB's shock decision... has triggered a wave of repricings," said Commerzbank analyst Markus Koch, adding that the uncertainty should remain positive for Bunds.

In the wake of the SNB's decision, yields on all Swiss government bonds out to nine-year maturities have fallen below zero. Analysts said this should also firm interest in Bunds and other top-rated bonds, as investors look to swap their Swiss bond holdings for higher-yielding alternatives.

Yields on 10-year Dutch, Finnish and Austrian bonds also fell to new record lows on Friday, as did Belgium and French equivalents after a brief sell-off on Thursday.

Market experts said the SNB has tended to buy "semi-core" French and Belgium bonds as part of an initiative to protect its currency cap, raising speculation that its demand for this debt would now waver.

Italian and Spanish yields also edged lower as bets firmed that the ECB was preparing to print money to start buying sovereign bonds next week. The view among traders was that the SNB abandoned its currency cap because it could not hold out against the tide of money coming its way from the ECB stimulus.

Italian 10-year yields were down 2 bps at 1.72 percent, while Spain's were 1 bps lower at 1.57 percent.

A Reuters poll of economists on Thursday showed there was a 90 percent chance the ECB conducts QE, and a 70 percent chance it is delivered this month.

While the ECB won crucial backing for its plans to buy government bonds earlier this week from a top EU legal adviser, the head of Germany's central bank on Thursday stressed that any scheme will have legal limits.

Belgian police killed two men during raids on Thursday against a group that prosecutors said was about to launch attacks, a week after gunmen killed 17 people in Paris, fuelling fears across Europe of young Muslims returning radicalised from the Middle East.

Copyright Reuters, 2015

]]>
imad_kueconomist@yahoo.com (Imaduddin) Europe Fri, 16 Jan 2015 12:51:15 +0000
German yields hit lows, Greek debt costs soar after Swiss cap shock http://www.brecorder.com/markets/fixed-income/europe/217848-german-yields-hit-lows-greek-debt-costs-soar-after-swiss-cap-shock.html http://www.brecorder.com/markets/fixed-income/europe/217848-german-yields-hit-lows-greek-debt-costs-soar-after-swiss-cap-shock.html imageLONDON: German bond yields hit record lows on Friday while fears about Greek banks sent the country's borrowing costs spiralling - signs of the fallout from the Swiss National Bank's shock decision to scrap its currency cap.

A surge in the Swiss franc after the SNB abandoned its 1.20 euro limit on Thursday saw investors flee equities and other risky assets, parking money instead in top-rated bonds.

Triple-A rated German debt was again the major beneficiary with 10-year yields falling below 0.40 percent as Swiss equivalents went negative for the first time.

Other core euro zone bonds, U.S. Treasuries and Gilts also made sizable gains, while most lower-rated euro zone government bonds managed to weather the storm as bets firmed that the European Central Bank would ease monetary conditions via quantitative easing next week.

But Greek yields shot higher after two Greek banks applied for emergency funding, with analysts citing Swiss franc-denominated mortgages as a factor.

"The SNB's shock decision ... has triggered a wave of repricings," said Commerzbank analyst Markus Koch, adding that the uncertainty should remain positive for Bunds.

As Switzerland became the first developed economy to see 10-year borrowing costs fall below zero, market watchers said investors had started to swap their Swiss holdings for higher-yielding alternatives.

Yields on 10-year Dutch, Finnish and Austrian bonds declined to new record lows on Friday, as did Belgium and French equivalents after a brief sell-off on Thursday.

Market experts said the SNB has tended to buy "semi-core" French and Belgium bonds as part of an initiative to protect its currency cap, raising speculation that its demand for this debt would now waver.

Elsewhere, Greek 10-year yields shot up 50 bps to 9.62 percent, with traders citing a decision by Eurobank and Alpha Bank to apply for emergency liquidity assistance from the Greece's central bank. Three-year yields were up 156 bps at 11.90 percent.

Maria Kanellopoulou at Euroxx Securities was among a number of analysts saying that the surge in the Swiss currency may make it more difficult for many Greeks to make repayments on franc-denominated mortgages. Eleven percent of Eurobank's group loans are in Swiss francs, according to Euroxx, while they account for around 2-4 percent at other Greek banks.

Eurobank said its funding request was a precaution while Alpha Bank declined to comment.

QE COMING

In the periphery, Italian 10-year yields briefly touched a new record low of 1.70 percent, while Spanish equivalents were flat at 1.58 percent.

The view among traders was that the SNB abandoned its currency cap because it could not hold out against the tide of money coming its way from the ECB stimulus.

A Reuters poll of economists on Thursday showed there was a 90 percent chance the ECB conducts QE, and a 70 percent chance it is delivered this month.

Benoit Coeure, one of the ECB's top policymakers, said on Friday the aim of QE could be to anchor long-term financing conditions and restore confidence in the bloc's inflation target.

While the ECB won crucial backing for these plans earlier this week from a top European Union legal adviser, the head of Germany's central bank stressed on Thursday that any scheme would have legal limits.

Copyright Reuters, 2015

]]>
imad_kueconomist@yahoo.com (Imaduddin) Europe Fri, 16 Jan 2015 11:59:46 +0000
Portugal PM sees rating upgrades after 30-year bond sale http://www.brecorder.com/markets/fixed-income/europe/217837-portugal-pm-sees-rating-upgrades-after-30-year-bond-sale.html http://www.brecorder.com/markets/fixed-income/europe/217837-portugal-pm-sees-rating-upgrades-after-30-year-bond-sale.html imageLISBON: Portugal's sale this week of bonds including a 30-year maturity confirms market confidence in the country that should lead to improvements in its credit ratings, Prime Minister Pedro Passos Coelho said on Friday.

He told parliament there was a lag between investors' more positive perception of the country's ability to reduce its budget deficit and the stance of credit rating agencies. All three big rating firms rank Portugal slightly below investment grade following its debt crisis and 2011 bailout.

"There is this lag, and it will be corrected by ratings agencies, a day sooner or a day later," Passos Coelho said.

Portugal sold 5.5 billion euros ($6.38 billion) of bonds on Tuesday, including 2 billion euros of 30-year debt, its first sale of such a long maturity since 2006. Foreign investors snapped up more than 90 percent of the paper.

"The way in which this placement worked out, with diversified foreign demand, is the most important gauge of confidence," the prime minister said. The 30-year sale was particularly important, he added, because it matures after Portugal is scheduled to have repaid all 78 billion euros of its bailout loans.

Lisbon exited the EU/IMF-led rescue programme last May.

Rating agencies Moody's and Fitch peg Portugal one notch below investment grade after raising its ratings last year, while Standard & Poor's rates it another notch lower.

Fitch warned on Thursday, however, that euro zone countries like Portugal could be downgraded if the region suffers prolonged deflation that could worsen their already heavy debts.

But Passos Coelho said he had "absolute confidence" the country will push forward with budget deficit cuts to help reduce its debt as the economy recovers from its worst recession since the 1970s.

"It is essential for investors and ratings agencies to see that this trajectory is maintained," he said, citing the example of Greece, where the prospect austerity policies will be dropped has pushed benchmark 10-year bond yields above 10 percent.

Portugal's benchmark 10-year bond yield fell to 2.57 percent on Friday -- near all-time lows -- from Thursday's 2.63 percent.

Copyright Reuters, 2015

]]>
imad_kueconomist@yahoo.com (Imaduddin) Europe Fri, 16 Jan 2015 11:49:00 +0000