Europe Stay updated with Business News, Pakistan news, Current world news and latest world news with Business Recorder.. Wed, 01 Oct 2014 18:03:19 +0000 SRA Framework 2.0 en-gb Spanish yields dip after court suspends Catalonia referendum imageLONDON: Spanish government bond yields edged lower on Tuesday after the country's constitutional court suspended an independence referendum called by one of its richest regions.

Catalonia President Artur Mas on Saturday signed a degree to hold a referendum on Nov. 9, a move that spooked investors who feared Spain may lose a region that accounts for around a fifth of Spain's economic output.

Fitch ratings agency put the region's BBB- rating on negative watch as a result. The agency said that rating might be downgraded by at least two notches if Catalonia found itself without access to central government financing.

"Spain is driving Italy and other peripheral markets in this current environment due to the political risk that is sitting with the separatist movement in Catalonia," said Alessandro Giansanti, senior rates strategist at ING.

Spain's 10-year yields edged 3 basis points lower to 2.21 percent, while Italian bonds fell by a similar amount to 2.39 percent.

Traders said investors were also taking hesart from the news that Italian Prime Minister Matteo Renzi overcame fierce opposition to win backing in his party for labour reforms.

Portuguese equivalents were flat at 3.16 percent, while Monday's sharp sell-off in Greek bonds appeared to have died off with yields 1 bps lower on Tuesday at 6.51 percent.

Strategists warned, however, that Greece's plan to escape the strict conditions of its bailout programme could still rattle investors going forward.

"Greece's aim to wean itself off from the final IMF tranches not only implies increasing supply pressure in GGBs which still have a limited investor base, but also a weakening lever on Greece's fiscal prudence and reform efforts," Commerzbank strategists said on Tuesday.

Already on track for their first monthly rise since February, German Bund yields inched up ahead of September's euro area inflation reading due at 0900GMT.

Ten-year yields rose 1 bps to 0.97 percent.

Economists polled by Reuters had predicted a reading of 0.3 percent, but German reported on Monday its inflation rate was higher than expected. Some analysts see a possibility the euro zone rate will be higher as well.

Yields would probably rise across the region if inflation does come in higher than expected. That would take some pressure off the European Central Bank to introduce new policy measures to stimulate the euro zone economy. The ECB meets on Thursday in Naples, Italy.

Copyright Reuters, 2014

]]> (Imaduddin) Europe Tue, 30 Sep 2014 13:08:56 +0000
Greek yields hit two-month high, early bailout exit plan cited imageLONDON: Greek government bond yields rose to their highest level in almost two months on Monday as Athens' plans for an early exit from the country's bailout programme raised concerns about its future financing and debt relief.

Prime Minister Antonis Samaras last week publicly acknowledged that Greece hoped to wean itself off the 240-billion euro international aid package a year before its scheduled end in early 2016.

The plan is a gamble for Greece as it makes a tentative return to bond markets after its 2012 debt default.

"The worry is that if they argue that they don't need further help, then the market will anticipate that there is going to be more bond supply," a trader said. Greek 10-year bond yields rose 37 basis points, their biggest one-day jump since mid-May, to 6.526 percent.

Copyright Reuters, 2014

]]> (Shoaib-ur-Rehman Siddiqui) Europe Mon, 29 Sep 2014 12:06:51 +0000
Italian, Spanish yields rise after Gross leaves Pimco imageLONDON: Italian and Spanish 10-year bond yields rose on Friday after Bill Gross said he had left the world's biggest bond fund Pimco, which has large investments in euro zone peripheral bonds.

"There is a perception that Pimco is heavily long peripheral bonds, therefore people assume there could be some sellers," said one government bond trader, adding that some investors feared the fund may change strategy.

Italian 10-year bond yields rose 4 basis points on the day to 2.40 percent, while equivalent Spanish yields rose 5 bps to 2.20 percent.

Bill Gross was Pimco's chief investment officer. He left to join Janus Capital Group.

Copyright Reuters, 2014

]]> (Shoaib-ur-Rehman Siddiqui) Europe Fri, 26 Sep 2014 14:16:48 +0000
Turkish Treasury sees Oct domestic borrowing 10.8bn lira

imageISTANBUL: Turkey's Treasury said on Friday it planned to borrow 10.8 billion lira ($4.77 billion) from domestic markets in October against debt redemptions of 15 billion lira.

Borrowing in November was seen at 5.3 billion lira against redemptions of 5.7 billion.

In December, borrowing was seen at 800 million lira against redemptions of 1.1 billion, the Treasury said in a statement on its website.

Copyright Reuters, 2014

]]> (Shoaib-ur-Rehman Siddiqui) Europe Fri, 26 Sep 2014 13:57:07 +0000
German bond yields dip after weak Ifo data ramps up ECB pressure imageLONDON: German bond yields edged lower on Wednesday after disappointing business sentiment data in the euro zone's largest economy further underlined the prospect of additional easing measures from the European Central Bank.

Germany's headline Ifo number fell for the fifth straight month in September and expectations for future activity dropped to its lowest since December 2012. That stoked more worries about the growth outlook after a survey on Tuesday showed the country's manufacturing sector slowing.

This slump in economic indicators, allied with a weak take up for the ECB's new set of emergency loans last week, has raised the prospect that the euro zone central bank will have to resort to other measures to maintain the recovery.

"It provides a further signal of broad-based weakness in economic activity and raises pressure on policymakers to address this," said Lyn Graham-Taylor, a strategist at Rabobank.

The Bank of Spain on Wednesday said domestic demand and new job creation showed signs of slowing in the third quarter, hindering the turnaround in the bloc's fragile periphery.

Without any improvement in the growth outlook, RBS analysts say the ECB will have to start buying government bonds via a broad-based asset purchase programme known as quantitative easing (QE) by March 2015.

They say QE will push German 10-year yields as low as 0.65 percent. German 10-year yields were 2 basis point lower at 0.99 percent on Wednesday.

Other strategists say ECB chief Mario Draghi's commitment to expand the central bank's balance sheet back to levels seen in 2012 will prove near impossible without a QE programme.

The ECB is expected to outline a scheme to start buying private assets in the form of covered bonds and asset-backed securities next month but many are sceptical about its ability to buy large amounts of these securities in illiquid markets.


Ultra-low inflation is another problem for the ECB and Draghi said on Wednesday that the bank will keep monetary policy loose for as long as it takes to push consumer prices back up to its desired 2 percent level.

Year-on-year consumer inflation in the 18 country bloc was just 0.4 percent in August, but Draghi reiterated on Wednesday he saw no danger of outright deflation.

The ECB's preferred market measure of inflation outlook - the five-year, five-year forward breakeven rate - has fallen below levels seen in the most acute phases of the euro crisis in recent days.

In the periphery, 10-year bond yields dipped 4 bps to 2.18 percent as the Bank of Spain's monthly report filtered through the market, while Italian bonds were 2 bps lower at 2.38 percent.

Greek bonds were the worst performers suffering a second day of acute selling pressure sparked by concerns that the country's plans for an early bailout exit could hamper future debt relief and create more risks for private investors. Ten-year yields were at their highest levels in over a month, 11 bps up on the day at 6.19 percent.

On the supply front, the Netherlands is auctioning a new five-year bond, although the sale appeared to have little impact on secondary prices.

Copyright Reuters, 2014

]]> (Imaduddin) Europe Wed, 24 Sep 2014 12:30:10 +0000
German bond yields edge up ahead of Ifo business sentiment data imageLONDON: German bond yields opened a fraction higher on Wednesday as investors tentatively awaited the latest indication of business sentiment in the euro zone's largest economy.

Markets expect a modest fall in Germany's Ifo reading for September, due at 0800 GMT, which is being closely watched after data showed a decline in the country's manufacturing sector on Tuesday, adding to an erosion of inflation expectations.

This slump in economic indicators, allied with a weak take up for the ECB's new set of emergency loans last week, has raised the prospect that the European Central Bank (ECB) will have to resort to other measures to kickstart the recovery.

Some strategists say without any improvement in the growth outlook, the ECB will soon have to start buying government bonds in a broad-based asset purchase programme known as quantitative easing (QE).

"The main knockout for sovereign QE would be a pick-up in nominal growth," said RBS analysts, referring to Ifo.

RBS's base case scenario is that QE will be needed in March 2015 and will push German 10-year yields as low as 0.65 percent.

German 10-year yields rose 1 basis point to 1.02 percent.

ECB chief Mario Draghi reiterated on Wednesday that euro zone monetary policy would remain accommodative for a long period and that the goal was to push ultra-low inflation back up closer to the two percent level.

The ECB's preferred market measure of inflation outlook - the five-year, five-year forward breakeven rate - has fallen below levels seen in the most acute phases of the euro crisis in recent days.

Lower-rated sovereign bonds lagged their peers in core European markets as investors lost some of their appetite for riskier assets after US and Arab allies' air strikes on militant groups in Syria for the first time on Tuesday.

Spanish, Italian and Portuguese 10-year yields all opened 2 bps higher at 2.42 and 2.22 percent and 3.22 percent, respectively.

Greek equivalents were flat at 6.08 percent, pausing after a steep sell-off on Tuesday sparked by concerns that the country's plans for an early bailout exit could hamper future debt relief and create more risks for private investors.

Copyright Reuters, 2014

]]> (Shoaib-ur-Rehman Siddiqui) Europe Wed, 24 Sep 2014 07:55:19 +0000
Spain sells 4.1bn euros in short-term debt, yields edge higher

imageMADRID: Spanish short-term debt yields inched higher from record lows in August at auction on Tuesday, against a backdrop of weak growth expectations which are seen pushing the European Central Bank to approve more stimulus measures.

The Treasury sold 4.1 billion euros ($5.28 billion) of 3- and 9-month T-bills, beating the top end of its target of between 3 billion and 4 billion euros.

The 3-month bill sold 995 million euros at an average yield of 0.056 percent compared to 0.032 percent at the last auction of the same maturity on Aug 26. Demand was 2.3 times the offer, versus 3.2 times previously.

The Treasury sold 3.1 billion euros of the 9-month bill at an average yield of 0.146 percent, compared to 0.107 percent at the last auction.

The bond was 1.5 times subscribed compared to 2.3 times previously.

Copyright Reuters, 2014

]]> (Shoaib-ur-Rehman Siddiqui) Europe Tue, 23 Sep 2014 10:09:12 +0000
Euro zone bond yields fall as markets brace for lacklustre data imageLONDON: Euro zone bond yields fell slightly on Tuesday before the release of region-wide business surveys that are expected to keep pressure on the European Central Bank to deliver more stimulus.

Purchasing managers' indexes across the euro zone are likely to confirm the euro zone's economic recovery is weak and unable to fuel inflation back to the ECB's target of close to 2 percent from near zero levels.

Speaking to the economic and monetary affairs committee of the European Parliament on Monday, ECB President Mario Draghi said the central bank was ready to use additional unconventional tools, closely monitoring risks to inflation.

Earlier this month, Draghi announced a plan to buy asset-backed securities and covered bonds, but markets are increasingly speculating that he will be forced to start buying government bonds, a programme known as quantitative easing (QE).

"Disappointing euro area PMIs should underpin QE speculation today as inflation expectations continue to slide," Commerzbank rate strategist Michael Leister said in a note.

German 10-year Bund yields, the benchmark for euro zone borrowing costs, fell 1 basis point to 1.01 percent.

Yields on lower-rated euro zone bonds were flat in early European trade.

Weak data is expected to push them lower despite the fact that countries such as Italy and Spain need a significant pick-up in growth and inflation to stabilise their debt.

Investors buy the bonds anticipating the ECB will eventually enter the market and sweep a large chunk of them out. Spanish 10-year yields were flat at 2.22 percent, while Italian yields stood at 2.39 percent - both keeping close to their record lows.

"We have PMIs today. Peripheral yields should continue to fall," one trader said.

Copyright Reuters, 2014

]]> (Shoaib-ur-Rehman Siddiqui) Europe Tue, 23 Sep 2014 07:53:05 +0000
French bonds outperform after dodging Moody's ratings downgrade imageLONDON: French bonds outperformed most of their euro zone peers on Monday after Moody's spared the region's second largest economy from a fresh credit rating downgrade even though Paris has overrun its deficit targets.

The French government's admission last week that it would take longer than planned to cut its deficit as agreed with European partners had prompted speculation in the market and in the press that a one-notch downgrade was all but inevitable.

Moody's kept its rating on French bonds at Aa1 late on Friday but maintained its negative outlook, citing the difficulties of pushing through reforms.

French 10-year bond yields fell 4 basis points to 1.35 percent, outperforming other euro zone bonds whose yields were also lower on expectations that economic data due this week will add to signs of anaemic growth in the region.

Their yield spread over benchmark German Bunds tightened 2 bps to 38 bps.

"There's some limited reaction on the back of Moody's decision to keep the rating but I wouldn't have been surprised to see a very limited reaction even if there was a one-notch downgrade," said Patrick Jacq, a strategist at BNP Paribas.

"It's still a very liquid market and you still have some spread above German paper. In such conditions there's little risk at the moment of a decent sell-off on French paper."


Market focus is also on European Central Bank President Mario Draghi's appearance at the EU parliament later on Monday, which follows tepid demand for the bank's latest scheme to push cheap long-term cash through the financial system.

If purchasing manager surveys on Tuesday point to more weakness in the euro zone economy, it will add to speculation that Draghi sooner or later will be forced to embark on full-scale asset purchases including government bonds, a tool known as quantitative easing.

A fall in the ECB's preferred measure of the market's long-term inflation expectations to its lowest this year on Friday, coming after the small take-up of the four-year loans, exacerbated deflation fears and increased speculation about QE.

The five-year, five-year breakeven forward rate, which measures roughly where markets expect 2024 inflation forecasts to be in 2019 fell to around 1.91 percent on Friday, within a whisker of 2010 lows of 1.90 percent.

Expectations that the ECB will eventually have to undertake more aggressive monetary stimulus were also supporting demand for lower-rated euro zone bonds.

Italian 10-year and Portuguese yields were slightly lower.

Spanish yields retreated slightly from lows hit last Friday after voters in Scotland rejected independence from the United Kingdom, easing concerns that separatists in wealthy Catalonia could be emboldened by the Scots.

"We're still bullish periphery despite the poor TLTRO take-up, as this should bring QE closer. We are still expecting 20 percent of TLTRO cash to go into carry trades," RBS strategists said in a note.

Copyright Reuters, 2014

]]> (Shoaib-ur-Rehman Siddiqui) Europe Mon, 22 Sep 2014 12:21:48 +0000
German bond futures rally as weaker equities lift safe-haven debt imageLONDON: German Bund futures jumped on Monday as a retreat in stocks on expectations of soft Chinese manufacturing data spurred flows into safe-haven government bonds.

Flash manufacturing PMI readings from China, the world's second biggest economy, could come in below the 50 level early on Tuesday, traders said, indicating that manufacturing activity is contracting.

"The Asian markets are weak so it looks to be a risk-off day and a continuation of the Bund rally that started last week," said Piet Lammens, a strategist at KBC Securities.

Bund futures were last 30 ticks higher at 148.79 compared with 148.49 at Friday's settlement.

Copyright Reuters, 2014

]]> (Imaduddin) Europe Mon, 22 Sep 2014 07:06:05 +0000