Borrowing Costs Drop as France Joins Spain in $18.8 Billion of Bond Sales
France, Spain Sell EU14.6 Billion in Debt as Yields Slide
Antoine Antoniol/Bloomberg
France sold 7.97 billion euros of notes, just short of its maximum target.
France sold 7.97 billion euros of notes, just short of its maximum target. Photographer: Antoine Antoniol/Bloomberg
Jan. 19 (Bloomberg) -- Fabrice Seiman, co-President of Lutetia Capital, talks about the European sovereign-debt crisis and his bond strategy. He speaks from Paris with Mark Barton on Bloomberg Television's "The Pulse." (Source: Bloomberg)
Jan. 19 (Bloomberg) -- Andrew Lilico, managing director at Europe Economics, talks about the timing of a Greek debt default and the prospect of contagion in the euro zone. Lilico also discusses Spanish and Italian bonds with Mark Barton on Bloomberg Television's "The Pulse." (Source: Bloomberg)
France, Spain Sell EU14.6 Billion in Debt as Yields Slide
Balint Porneczi/Bloomberg
Pedestrians arrive at the La Defense business district in Paris.
Pedestrians arrive at the La Defense business district in Paris. Photographer: Balint Porneczi/Bloomberg
France and Spain sold 14.6 billion euros ($18.8 billion) of bonds, with both nations’ funding costs falling in the first sale of medium and long-term debt since Standard & Poor’s downgraded their ratings.
France sold 7.97 billion euros of notes, just short of its maximum target, with the average yield on the benchmark two-year notes sliding to 1.05 percent from 1.58 percent in October. Spain sold 6.61 billion euros in bonds maturing in 2022, 2019 and 2016, more than its maximum target of 4.5 billion euros. It issued debt due 2022 at an average of 5.403 percent, down from 6.975 percent in November.
The sales came after S&P on Jan. 13 stripped France of its AAA rating and cut Spain by two levels to A. Spain has exceeded its maximum targets in all its bond auctions since Dec. 13, and demand has strengthened since the European Central Bank pumped 489 billion euros of three-year loans into the financial system on Dec. 21.
“They are both good strong auctions,” Padhraic Garvey, head of developed markets debt strategy at ING Bank NV in Amsterdam, said in an interview. “Spain is showing the market there’s ample demand for their paper. The result is perfectly in line with the sentiment we’ve see over the past couple of weeks. The ECB measures obviously help.”
The demand for Spain’s 2022 bond was 2.17 times the amount sold, compared with a bid-to-cover ratio of 1.54 in November. For the French sale it was 2.4, in line with 2011 sales.
Sliding Yields
France’s benchmark 10-year bonds yielded 3.09 percent at 11:09 a.m. London time, down from 3.13 percent on Dec. 5, when S&P warned of a rating cut. Borrowing costs fell on Jan. 16 at the French sale of 8.59 billion euros in bills, the first after the downgrade.
The Spanish 10-year benchmark yields rose to 5.25 percent, compared with 5.14 percent yesterday. They reached a 14-year high of 6.78 percent on Nov. 17.
Spain’s funding costs for four-year paper rose from an auction one week ago, even as demand increased. The 2016 debt yielded an average of 4.021 percent, up from 3.912 percent on Jan. 12. Demand for those notes was 3.24 times the amount sold, compared with 1.71 times last week.
France also sold 425 million euros of 10-year inflation linked bonds for an average yield of 1.07 percent, down from 2.32 percent on Nov. 17.
Investor demand is being stoked in part by the ECB, which has injected euros into the market by offering loans in so- called long-term refinancing operations, or LTROs. The ECB awarded 489 billion euros of three-year loans to 523 banks on Dec. 20, and banks in the region can use that cash to snap up government debt, investors said.
To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net Anchalee Worrachate in London at aworrachate@bloomberg.net;
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
Rate this Page