EuropeStay updated with Business News, Pakistan news, Current world news and latest world news with Business Recorder..http://www.brecorder.com/markets/fixed-income/europe.htmlWed, 30 Jul 2014 19:06:54 +0000SRA Framework 2.0en-gbGerman yields slip towards record lows as Ukraine conflict eyedhttp://www.brecorder.com/markets/fixed-income/europe/185409-german-yields-slip-towards-record-lows-as-ukraine-conflict-eyed.htmlhttp://www.brecorder.com/markets/fixed-income/europe/185409-german-yields-slip-towards-record-lows-as-ukraine-conflict-eyed.htmlimageLONDON: German bond yields dipped back towards record lows on Wednesday with conflicts in Ukraine and the Middle East supporting demand for safe-haven government bonds.

Benign US inflation data on Tuesday, suggesting less pressure for an early rise in interest rates by the Federal Reserve, helped keep bond yields subdued.

The European Union is considering tougher sanctions against Russia over the crisis in Ukraine which escalated after the downing of a Malaysian airliner last week. These could include restricting Russian access to European capital markets, defence and energy technology.

The ongoing conflict in the Gaza strip, where Israeli forces pounded multiple sites and said it was meeting stiff resistance from Hamas Islamists, also kept investor appetite for risk in check.

German 10-year yields were 1.4 basis points lower at 1.16 percent, nudging back towards the record low of 1.126 percent hit at the height of the euro zone debt crisis in mid-2012.

"Investors are quite happy to stay with their Bund positions. In light of the geopolitical tensions that are not yet completely resolved in Ukraine and the Middle East there's not much potential for Bund yields to pop higher any time soon," said Christian Lenk, a strategist at DZ Bank.

Market participants expect some of the hefty bond redemptions and coupon repayments, estimated at over 40 billion euros, due at the end of the month from Spain and Italy to be reinvested in German bonds, keeping yields subdued.

Yields on peripheral euro zone bonds were flat to a touch up.

MONEY MARKETS

Yields on shorter-dated core euro zone bonds were also a toucher lower as money markets showed little sign of strain from an expected drop in spare cash in the euro zone banking system as banks repay a bumper 21 billion euros in emergency loans to the European Central Bank.

Some market strategists expect excess liquidity to fall below 100 billion euros for the first time since May following the repayment and after banks took a lower-than-forecast amount of one-week loans from the ECB.

Others said short-term bond yields and money market rates were likely to remain subdued as excess liquidity was set to get

a boost in September when the ECB offers banks a fresh round of cheap four-year loans.

"The fact that there's a possibility for a huge rise in liquidity in September will cap any upward pressure in Eonia and short-term rates driven by a fall in excess liquidity," said Alessandro Giansanti, a strategist at ING.

The euro overnight interbank lending rate edged down to 0.04 percent on Tuesday from 0.048 percent on Monday, staying near the upper end of the 2 to 5 basis point range it has traded in during the last month.

Copyright Reuters, 2014

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imad_kueconomist@yahoo.com (Imaduddin)EuropeWed, 23 Jul 2014 11:09:21 +0000
Lower-rated euro zone bond yields dip as Ukraine crisis eyedhttp://www.brecorder.com/markets/fixed-income/europe/185014-lower-rated-euro-zone-bond-yields-dip-as-ukraine-crisis-eyed.htmlhttp://www.brecorder.com/markets/fixed-income/europe/185014-lower-rated-euro-zone-bond-yields-dip-as-ukraine-crisis-eyed.htmlimageLONDON: Yields on lower-rated euro zone bonds slipped on Monday as riskier assets tentatively recovered on hopes the coming days might bring a diplomatic solution to the Ukraine crisis after the downing of an airliner over the country last week.

The fact the situation did not deteriorate over the weekend stabilised markets, though the lack of concrete developments kept price moves modest and benchmark German yields pinned near record lows.

The plane crash on Thursday, blamed by Western countries on pro-Russian rebels in Ukraine, prompted a sell-off in riskier assets such as equities and drove investors into the perceived safety of top-rated government bonds.

The incident intensified tensions between the West and Russia, which initially flared after Russia annexed Ukraine's Crimea region and expressed support for separatist rebels in the east of the country.

Some in the market reckon the loss of the Malaysian jet will trigger a diplomatic solution to the worst crisis between Russia and the West since the Cold War.

"Investors don't seem as worried as they were last Friday," said Christian Lenk, a strategist at DZ Bank. "There are simply some hopes now implicitly that maybe we have seen a culmination of that conflict and may see some easing in the near future."

Italian 10-year yields were 2 basis points down at 2.79 percent while Spanish equivalents were 1.5 bps lower at 2.61 percent.

SPAIN PLANNING 50-YEAR BOND?

Traders were keeping an eye on a potential debt sale from Spain, after a newspaper report said Madrid could sell a 50-year bond via private placement.

Spanish financial daily Expansion quoted Inigo Fernandez de Mesa, the head of treasury, as saying that he could not rule out a 50-year private placement since demand for ultra-long term paper among international investors has grown.

Spain and Italy have met more than 70 percent of their funding needs for this year, taking advantage of record low borrowing to frontload bond sales and extend the maturity of their debt.

Hefty redemptions and coupon payments later in the month and about 1 trillion euros in cheap loans to banks from the European Central Bank due from September were also supporting demand for peripheral euro zone bonds, which still offer a relatively higher yield pick-up over core bonds.

German 10-year yields, the benchmark for euro zone borrowing costs, were a touch lower at 1.15 percent, within sight of an all-time low of 1.126 percent hit at the height of the debt crisis in mid-2012.

"In the absence of more bad news, core yields could creep a bit higher today, but in general the upside still looks limited in the near term, as risks remain the geopolitical tensions will only increase and the cash flow picture remains rather supportive," Nordea strategists said in a note.

Copyright Reuters, 2014

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imad_kueconomist@yahoo.com (Imaduddin)EuropeMon, 21 Jul 2014 11:07:19 +0000
Spanish yields steady before bond sales in Madrid, Parishttp://www.brecorder.com/markets/fixed-income/europe/184401-spanish-yields-steady-before-bond-sales-in-madrid-paris.htmlhttp://www.brecorder.com/markets/fixed-income/europe/184401-spanish-yields-steady-before-bond-sales-in-madrid-paris.htmlimageLONDON: Spanish bond yields held steady on Thursday before a debt sale seen drawing strong demand as fears recede of contagion from the financial troubles faced by the founding family of Portugal's biggest listed bank.

The euro zone bond market has stabilised this week with investors more optimistic that Lisbon-listed Banco Espirito Santo will be able to deal with any exposure to problems facing companies of its founding family.

Spanish and Italian bonds have traded independently of junk-rated Portuguese and Greek debt, with market participants saying the concerns around BES pose no systemic risk for the euro zone.

This made for a favourable backdrop for the Spanish debt sale of up to 3 billion euros of 2017, 2022 and 2032 bonds.

The small size of the auction and the fact that the bonds on offer cheapened last week favoured a strong sale, traders said.

"It should be well supported. There's good reason to believe that the nature of the BES issue ... should be contained and not something that should become a systemic issue," said Anton Heese, a strategist at Morgan Stanley.

"Net supply over the next quarter is negative so it's not as if the market is being called up to absorb large amount of supply over the next few months. That's also a supportive factor."

Spanish 10-year yields were flat on the day at 2.66 percent while Italian equivalents were a touch lower at 2.82 percent.

GETTING IN CHEAPER

Thursday's bond sale will see Spain complete around 70 percent of its 2014 funding programme. Both Madrid and Rome have ramped up their debt sales, taking advantage of an investor hunt for yield that has driven their borrowing costs to record lows.

The prospect of a fresh round of European Central Bank long-term loans to banks later this year is fuelling demand for peripheral euro zone bonds, which still offer relatively higher yields than those on better-rated euro zone bonds.

Additionally, some investors see last week's sell-off in the periphery as an opportunity to buy at cheaper levels.

"We expect a successful auction, with investors who have missed the huge rally this year possibly taking advantage of the recent setback to accumulate exposure," Unicredit strategists said in a note.

France will also sell up to 8.5 billion euros of two-, four- and five-year bonds as well as up to 1.5 billion euros of 2018 and 2024 debt linked to euro zone inflation and 2021 paper linked to French inflation. Bond redemptions from core euro zone countries this week and the ECB's ultra-easy monetary policy are seen supporting demand there too.

Portuguese 10-year yields were steady at 3.74 percent after falling more than 10 bps on Wednesday on reassurances from BES and Lisbon that the bank was well capitalised and able to deal with any exposure to the troubled companies of the Espirito Santo family.

Copyright Reuters, 2014

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imad_kueconomist@yahoo.com (Imaduddin)EuropeThu, 17 Jul 2014 10:50:32 +0000
Portugal one-year T-bill yield up in auction after market turmoilhttp://www.brecorder.com/markets/fixed-income/europe/184220-portugal-one-year-t-bill-yield-up-in-auction-after-market-turmoil.htmlhttp://www.brecorder.com/markets/fixed-income/europe/184220-portugal-one-year-t-bill-yield-up-in-auction-after-market-turmoil.htmlimageLISBON: Portugal sold all 1.25 billion euros in Treasury bills on offer on Wednesday, but the yield on the longer of two maturities sold rose after recent market turmoil over the exposure of the country's largest listed bank to its troubled founding family's debt.

The IGCP debt agency said the average yield on 12-month bills rose to 0.453 percent from 0.364 percent at a previous auction last month. It sold 850 million euros in this maturity.

The yield on 6-month bills still fell to 0.243 percent from 0.438 percent at the last auction of this maturity in March, which was before Portugal exited its international bailout in May.

Demand outstripped the amount placed by 2.46 times on 6-month bills and 2.05 times on the longer maturity, the IGCP said.

Copyright Reuters, 2014

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imad_kueconomist@yahoo.com (Imaduddin)EuropeWed, 16 Jul 2014 10:37:05 +0000
Greece sells 1.625bn euros of 3-month T-bills, yield dropshttp://www.brecorder.com/markets/fixed-income/europe/184013-greece-sells-1625bn-euros-of-3-month-t-bills-yield-drops.htmlhttp://www.brecorder.com/markets/fixed-income/europe/184013-greece-sells-1625bn-euros-of-3-month-t-bills-yield-drops.htmlimageATHENS: Greece sold 1.625 billion euros ($2.21 billion) of three-month treasury bills on Tuesday to roll over a maturing issue, the country's debt agency PDMA said.

The T-bills were priced to yield 1.75 percent, down five basis points from 1.80 percent in a previous sale in June - the lowest funding cost since January 2010 when the debt agency sold three-month treasury paper at 1.67 percent.

The sale's bid-cover ratio was 2.35, down from 2.99 in the previous sale.

The amount raised included 375 million euros in non-competitive bids. The settlement date for Tuesday's auction will be July 18. Athens has a stock of about 15 billion euros of T-bills, which it regularly refinances.

Copyright Reuters, 2014

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imad_kueconomist@yahoo.com (Imaduddin)EuropeTue, 15 Jul 2014 11:05:27 +0000
Portuguese bond yields fall after BES takes steps to reassure market http://www.brecorder.com/markets/fixed-income/europe/183756-portuguese-bond-yields-fall-after-bes-takes-steps-to-reassure-market.htmlhttp://www.brecorder.com/markets/fixed-income/europe/183756-portuguese-bond-yields-fall-after-bes-takes-steps-to-reassure-market.htmlimageLONDON: Portuguese bond yields fell further on Monday after the country's biggest bank took steps aimed at reassuring investors of its stability, calming peripheral debt markets after their first episode of contagion this year.

Recent disclosures of financial irregularities at a web of family-held holding companies behind Portugal's largest listed bank, Banco Espirito Santo, had pummeled the country's stocks and bond markets.

BES said last week that it had 2.1 billion euros in capital above minimum regulatory requirements, which should be enough to cover any losses for its 1.15 billion exposure to Espirito Santo.

On Monday BES said its board has put in place new executives who were originally supposed to take over at the end of July, after the Bank of Portugal brought forward management changes there aiming at distancing the bank from the financial woes of its founding family.

Portuguese 10-year bond yields fell 9 basis points to 3.80 percent, retreating further from a six-week high above 4 percent hit last week. Spanish, Italian and Greek bond yields also fell.

Last week, the sell-off in Portuguese bonds spread to the euro zone's other weaker members and hurt demand at Greece's second bond sale after its 2012 default in the first significant bout of debt market contagion in 2014.

"The markets will recover a bit," said Emile Cardon, a market economist at Rabobank. "But I'm a bit cautious.

There's still reason to believe that not all problems were resolved in the euro zone and we will continue to see bouts of volatility during a fragile recovery."

Credit Agricole rate strategist Peter Chatwell said the fact that Portugal has already done some prefunding for next year and that there was still a residual 6 billion euros from its rescue programme available for its banking sector should prevent an extended escalation of the sell-off in the periphery.

"But the risk is for periphery to remain vulnerable in the near-term until there is more information on the situation and a plan of action," Chatwell said.

Elsewhere, Slovenian 10-year bond yields were 3 basis points higher at 3.30 percent after political newcomer Miro Cerar led his party to victory in elections on Sunday and indicated that he aims to rewrite a reform package agreed with the European Union to fix his country's budget problems.

Hiccups in Slovenia's privatisation programme lifted Slovenian bond yields in recent weeks, but some investors said they will use that as a buying opportunity, betting Cerar can reduce the government's 50 percent stake in the economy and cut the budget deficit.

Copyright Reuters, 2014

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s.rs96@yahoo.com (Shoaib-ur-Rehman Siddiqui)EuropeMon, 14 Jul 2014 07:40:54 +0000
Italy pays record low yields for 15-year, 3-year bonds despite BES concerns http://www.brecorder.com/markets/fixed-income/europe/183391-italy-pays-record-low-yields-for-15-year-3-year-bonds-despite-bes-concerns.htmlhttp://www.brecorder.com/markets/fixed-income/europe/183391-italy-pays-record-low-yields-for-15-year-3-year-bonds-despite-bes-concerns.htmlimageMILAN: Italy paid record low yields to sell 15-year and 3-year bonds at auction on Friday as persistently abundant liquidity appeared to overshadow financial concerns about the parent company of Banco Espirito Santo , Portugal's biggest bank.

The Italian treasury managed to sell a total of 7.5 billion euros ($10.23 billion) - the top of its planned target range - as it auctioned three-year, seven-year and 15-year bonds, despite a volatile week in which bonds came under pressure from weak Italian economic data.

"The dynamics of economic data will remain the most important factor for Italy and Spain while Portuguese domestic issues in the banking sector will be more relevant for Portugal's government bonds," said Luca Cazzulani, an analyst at UniCredit.

A March 2030 bond fetched an average 3.44 percent yield, down from 3.575 percent when it was placed through a syndicate of banks in May, and the lowest since the launch of the euro.

Demand was 1.42 times the 2 billion euros assigned.

The Treasury also placed 3 billion euros of a three-year bond, paying an average yield of 0.84 percent, down from 0.89 percent at the mid-June sale and also the lowest yield paid for this bond since the introduction of the euro.

Demand for this issue was slightly lower than at the previous auction, with the bid-to-cover ratio falling to 1.49 from 1.6.

A seven-year bond also on auction was sold at an average yield of 2.17 percent, down from 2.12 percent at the previous auction a month ago.

Copyright Reuters, 2014

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s.rs96@yahoo.com (Shoaib-ur-Rehman Siddiqui)EuropeFri, 11 Jul 2014 12:13:25 +0000
Portuguese yields sag as BES seeks to soothe investor nerveshttp://www.brecorder.com/markets/fixed-income/europe/183379-portuguese-yields-sag-as-bes-seeks-to-soothe-investor-nerves.htmlhttp://www.brecorder.com/markets/fixed-income/europe/183379-portuguese-yields-sag-as-bes-seeks-to-soothe-investor-nerves.htmlimageLONDON: Portuguese bond yields fell on Friday as the country's biggest bank sought to reassure investors about its financial stability after concerns over the health of its parent company rattled financial markets this week.

Investor worries about losses on loans to the parent company of Banco Espirito Santo accelerated a sell-off in Portuguese assets this week that triggered the first significant episode of contagion this year in peripheral euro zone bonds.

The bonds recovered some poise after Banco Espirito Santo said on Thursday night that losses on loans to the troubled business empire of its founding family would not put BES at risk of running short of capital.

The calmer market backdrop enabled Italy to sell 7.5 billion euros of bonds, the top of its targeted range, at a solid auction, which sharply contrasted with Greece's three-year bond sale on Thursday where demand was hurt by fallout from Portugal.

The Italian sale demonstrated the enduring investor search for relatively higher returns still offered by the larger, liquid debt markets of Italy and Spain, despite a two-year rally that has driven borrowing costs to record lows.

Yields on Portuguese 10-year bonds were down 10 basis points at 3.92 percent.

They had risen about 40 bps this week, their biggest weekly increase this year. "It (the sell-off) was a bit overblown.

After the huge rally behind us in non-core bonds as well as equities, we've had a multitude of bad news and so the market clearly needed a trigger for profit-taking and that's what happened," said Jan von Gerich, chief fixed income analyst at Nordea. "For now at least, sentiment will remain nervous but I don't think it's something that will reverse the general downward trend in peripheral bond yields."

ECB LARGESSE

Yields on bonds issued by bailed-out Greece, whose three-year debt sale on Thursday saw poor demand amid the market rout, were 4 bps lower at 6.28 percent.

Italy sold three- and 15-year bonds at record low yields as persistently abundant liquidity appeared to overshadow the bank problems in Portugal.

European Central Bank interest rate cuts last month and its upcoming largesse to banks via cheap four-year loans to banks later this year is fostering demand for debt from the euro zone periphery as yields on top-rated bonds dwindle. Latest data also showed the recovery in countries like Spain remaining on track as growth stutters in Germany and France.

"We think those common factors will outweigh local factors, including the renewed concerns about the Portuguese banking sector, and we remain overweight in peripheral bonds, focusing on shorter maturities," said Seamus Mac Gorain, a portfolio manager at JPMorgan Asset Management.

Italian 10-year yields were 4 bps down at 2.90 percent.

Spanish equivalents were 2 bps lower at 2.80 percent.

Copyright Reuters, 2014

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s.rs96@yahoo.com (Shoaib-ur-Rehman Siddiqui)EuropeFri, 11 Jul 2014 11:51:00 +0000
Greek yields jump as bond sale draws modest demandhttp://www.brecorder.com/markets/fixed-income/europe/183237-greek-yields-jump-as-bond-sale-draws-modest-demand.htmlhttp://www.brecorder.com/markets/fixed-income/europe/183237-greek-yields-jump-as-bond-sale-draws-modest-demand.htmlimageLONDON: Greek bond yields extended their rise on Thursday with traders citing investor disappointment with initial demand for a new three-year bond Athens is selling via a syndicate of banks.

Order books for the bond have topped 3 billion euros, according to IFR, a Thomson Reuters service. When Greece sold a five-year bond back in April orders reached over 20 billion euros.

Bailed-out Greece is aiming to raise up to 3 billion euros from the new bond, its second bond sale after it defaulted in 2012.

Greek 10-year bond yields were up 14 basis points on the day to 6.25 percent, underperforming the rest of the euro zone debt market.

Yields on bonds issued by peer Portugal were up 13 bps at 3.94 percent, remaining under pressure amid concern over a proposed debt restrcturing by a holding company of the founding family of Banco Espirito Santo (BES), the country's largest listed bank.

Copyright Reuters, 2014

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imad_kueconomist@yahoo.com (Imaduddin)EuropeThu, 10 Jul 2014 10:33:34 +0000
Portugal's bond yields spike on Espirito Santo group reportshttp://www.brecorder.com/markets/fixed-income/europe/183080-portugals-bond-yields-spike-on-espirito-santo-group-reports.htmlhttp://www.brecorder.com/markets/fixed-income/europe/183080-portugals-bond-yields-spike-on-espirito-santo-group-reports.htmlimageLONDON: Portuguese bond yields shot higher on Wednesday on local news reports of a proposed debt restructuring by a holding company of the founding family of Banco Espirito Santo (BES), Portugal's largest listed bank.

Ten-year yields spiked nearly 30 basis points to hit a day's high of 3.96 percent, as one trader said some banks were urging the sovereign to delay plans for a debt sale expected in the coming days. The Portuguese Treasury declined to comment.

"There is a lot of reports about the creditors of this holding company having to be restructured ... and the market is jittery about the potential risk for the Portuguese financial sector," said Pablo Zaragoza, chief strategist at BBVA.

Luxembourg authorities said last month they had launched an investigation into Espirito Santo International, the Luxembourg-registered holding company of the family which founded BES, over alleged breaches of company law.

Portuguese business daily Diario Economico reported on Wednesday that ESI was set to propose to creditors an extension of the maturity of its debts. Separately, the Expresso weekly reported that clients holding debts of Espirito Santo family companies had received proposals to swap the debt for equity.

"It is having a knock-on effect on the government bonds market ... There's a CP (commercial paper) maturing and there are proposals to delay payments or paying ... equity instead," one trader said.

While Portuguese bonds were the worst performers on Wednesday, yields on other lower-rated euro zone bonds also rose. Greek 10-year bond yields climbed 16 basis points to a day's high of 6.19 percent.

GREEK SALE IMMINENT

Traders said investors were selling Greek bonds to make space in their portfolios for the country's second new issue since its default two years ago, tipped to be issued imminently.

Athens will open books to investors for a three-year bond later on Wednesday or on Thursday, two sources with knowledge of the matter told Reuters, a deal that will follow its sale of five-year debt back in April.

Issuing shorter-term debt will allow Greece to raise money more cheaply, with ministry sources reportedly hoping for an interest rate of under 3 percent. Strategists warn, however, that it could raise refinancing risks for a country whose economic and political situation is still fragile.

Market funding also remains more expensive than the official bailout aid Greece still receives. But the bond sale will help fill a funding gap of 12.6 billion euros the IMF predicts will open up next year, without the conditionality of bailout cash that has angered austerity-weary Greeks.

In order to receive the next 1 billion euro aid tranche, Greece has promised to sell off its biggest power producer PPC, a move that opposition parties and striking electricity workers have vowed to fight.

"There's a benefit beyond just the interest rate cost here - Greece is filling a financing gap and putting itself in a stronger negotiating position with the troika," RBS rates strategist Michael Michaelides said. The "troika" of international lenders comprises the European Commission, International Monetary Fund and European Central Bank.

Portugal and Ireland both built up cash buffers via markets ahead of their bailout exits, allowing them to pass up the offer of a precautionary credit line with similar conditionality.

The new bond is expected to be around the same size as the 3 billion euro five-year transaction with which Greece returned to markets in April. That deal drew more than 20 billion euros of interest from about 600 investors, many of whom are scrabbling for yield in an environment where loose central bank policy has pushed official interest rates to historic lows.

Yields on Irish 10-year bonds rose 8 bps to 2.37 percent, while Spain and Italy's rose 6 basis points to 2.78 and 2.90 percent respectively.

Copyright Reuters, 2014

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imad_kueconomist@yahoo.com (Imaduddin)EuropeWed, 09 Jul 2014 10:55:57 +0000