Spanish Yield Hits Fresh High

Spanish Yield Hits Fresh High

June 14, 2012
By MICHELE MAATOUK
Spanish government bond yields hit a fresh euro-era high Thursday after Moody's Investors Service became the latest ratings agency to downgrade the beleaguered nation's debt, increasing speculation that a full bailout for Spain isn't far away. Equity markets were moving lower after being mostly flat in the European morning.
Italian debt yields also climbed sharply ahead of a key bond auction, while German Bunds benefited from the resulting flight to safety, ending their recent weak run.

The asking yield on the Spanish 10-year benchmark bond traded at a new euro-era high of 7.01%, according to data from Tradeweb, while the Italian 10-year was quoted higher at 6.34%, the highest
yield in nearly four months.

The yield on the 10-year German benchmark was quoted 0.02 percentage point lower at 1.505%

Newedge said demand is difficult to predict as there are opposing forces at play. "We certainly know Italy will have to pay higher yields to attract market demand," it said. "The current level of spreads and yields are certainly not reflecting the fundamental picture for the country, which, although in the middle of a recession, is not broke," it added.

In the European morning, the benchmark Stoxx 600 index was down 1%, the U.K.'s FTSE 100 was down 1%, Germany's DAX was down 1% and France's CAC-40 was 1% lower.

Overall, technology stocks were the standout losers, led lower by Nokia, NOK1V.HE -9.26% which slumped after the company cut its second-quarter guidance and said it could cut up to 10,000 jobs. Nokia's woes weighed on the broader sector, pushing the Stoxx Europe 600 technology index down 1.1%.

In London, British Sky Broadcasting Group BSY.LN -6.91% and BT Group were on the back foot, after winning rights to screen English Premier League matches. Nomura said the news implies significant cost upside for BT.

"Our main concern is that BT does not have the specialist skills to run a pay TV channel efficiently and that further investment will be required to enhance its offering," it said. As for BSkyB, the brokerage said it paid a price increase of 40%, compared with its forecast of 20%

Equity markets are likely to move in a tight range in the next couple of days, as traders square up positions before the weekend, concerned a victory by the far-left Syriza party in Greece could see the country reject the terms of its latest bailout package, worth €130 billion.

On the economic calendar, euro-zone harmonized inflation data are due at 9 a.m. GMT, while U.S. initial jobless claims and Consumer Price Index are at 12:30 p.m. GMT.

On European foreign exchanges, the euro was up against the dollar and was recently fetching $1.2582, from $1.2556 late Wednesday in New York. The dollar was at ¥79.40 from ¥79.48.

Among commodities, spot gold was at $1621.60 a troy ounce, up $3.60 from New York, while July Nymex crude oil futures were up 29 cents at $82.91 per barrel and August Brent futures were up 16 cents at $96.88. The September bund contract was up six ticks at 141.77.