Tags: Italy | Yield | ecb | bonds

Italy Yield Below 7% After ECB Buys Bonds

Thursday, 10 Nov 2011 03:09 AM

 

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Italy’s bonds rose as the European Central Bank bought the country’s debt and the government sold all the bills planned at auction. U.S. futures advanced, indicating the Standard & Poor’s 500 Index will rebound from its biggest selloff since August, while the euro pared gains.

The yield on Italy’s 10-year bond dropped 29 basis points to 6.96 percent at 6:50 a.m. in New York. The euro appreciated 0.3 percent to $1.3577 after jumping 0.7 percent. The Stoxx Europe 600 Index added 0.1 percent, while S&P 500 futures rose 0.8 percent. The S&P GSCI index of 24 commodities climbed 0.3 percent, with oil in New York up 1.1 percent.

Italy sold 5 billion euros ($6.8 billion) of one-year bills at an average yield of 6.087 percent after yields yesterday on 10-year notes surged past the 7 percent level at which Greece, Ireland and Portugal sought international bailouts. ECB Governing Council member Klaas Knot said the bank can’t do “much more” to stem the debt crisis, while efforts to speed the setup of a permanent rescue fund have lost momentum as Germany and France clashed over provisions to force bondholders to share losses, three people involved in the negotiations said.

“Uncertainties still linger as to the political situation going forward and the capacity of bailout mechanisms to restore a more robust equilibrium,” Sean Maloney, a strategist at Nomura International in London, wrote in a note. “The wildcard in the process remains the ECB and the scope for greater utilization of its balance sheet and the implications of a change in stance here could, in the short term at least, be significant.”

Italy Bonds

The Italian two-year note yield slid 53 basis points, after jumping 82 basis points yesterday. The additional yield investors demand to hold 10-year French, Spanish, Austrian and Belgian bonds instead of benchmark German bunds rose earlier to euro-era records amid concern the region’s debt crisis is spreading.

The ECB bought Italian government bonds, according to three people familiar with the transactions, who declined to be identified because the deals are confidential. The ECB wasn’t immediately available for comment when contacted by telephone by Bloomberg.

More than $1 trillion was erased from the value of global equities yesterday, with the S&P 500 sliding 3.7 percent. Cisco Systems Inc. rallied 5.1 percent in pre-market trading after earnings topped analyst estimates.

Jobless Claims

The Labor Department may say jobless claims were little changed at 400,000 last week from 397,000 in the previous period, according to the median forecast of economists in a Bloomberg survey. Another report will probably show the U.S. trade deficit was $46 billion in September, compared with a $45.6 billion gap a month earlier.

The Dollar Index, which tracks the U.S. currency against those of six trading partners, fell 0.3 percent after advancing as much as 0.3 percent.

Three shares fell for every two that gained in the Stoxx 600. K+S AG retreated 4.9 percent as Europe’s largest producer of potash pared its outlook for sales and profit as economic volatility prompts wholesalers to scale back orders. Vedanta Resources Plc slid 5.2 percent after the largest copper producer in India said fiscal first-half profit dropped 92 percent on foreign-exchange losses.

European Aeronautic Defence and Space Co. rose 5.3 percent after reporting higher third-quarter profit. Svenska Cellulosa AB gained 6.9 percent after agreeing to buy Georgia-Pacific LLC’s European tissue operations.

China Exports Slow

The MSCI Asia Pacific Index declined 3.3 percent, the most since Sept. 22. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong tumbled 5.7 percent as China’s export growth slowed. The MSCI Emerging Markets Index slipped 2.7 percent.

New York oil climbed to $96.77 a barrel, the sixth gain in seven days. Copper fell 2.2 percent. China is the biggest buyer of the metal. Gold slipped 0.2 percent to $1,766.65 an ounce, paring an earlier drop of as much as 0.9 percent.


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