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[EmpireGlobalfx]

Italy pays euro-era high cost to sell its 5-year debt

(Reuters) - Italy paid a euro-era high price to sell five-year bonds on Monday, with investors wary of buying its debt until the country's new leadership undertakes profound economic reform.

The 3 billion euro sale, small by Italian standards, met slightly improved demand compared with a month ago, but the 6.29 percent cost of borrowing was seen as unsustainable as Italy tries to refinance its 1.9 trillion euro debt.

However, the yield was below secondary market levels, reflecting expectations of a more reform-friendly Italy after European Commissioner Mario Monti was asked to form a government on Sunday.

"(Monti) is perceived to be a positive change for the country," said Annalisa Piazza, rate strategist at Newedge.

"Cautiousness on the future developments in Italy is fully justified. Credibility has been lost and it will take a while for market participants to believe that the country is back on the right track."

Italian yields soared above 7 percent last week -- levels that ultimately led Greece, Portugal and Ireland to seek international aid.

Yet Italy is too big to be bailed out with currently available resources and preventing it becoming the next victim of the two-year old euro zone debt crisis is seen as crucial to future of the single currency itself.

Bids at Monday's auction were 1.469 times the amount on offer, compared with 1.344 percent at last month's sale, when gross yields were just 5.32 percent.

"(The results) just basically tell us in the short term that we are not (spiraling) out of control," said Marc Ostwald, strategist at Monument Securities in London.

"But in the long run, paying 6.29 percent for five-year paper is just not an option, it's not sustainable over the long term. You would need to be back below 5 (percent) before we get there and that looks very far away still."

Yields on benchmark Italian 10-year bonds climbed to 14-year highs of around 7.5 percent last week before Prime Minister Silvio Berlusconi, seen by many in the market as an obstacle in the way of reforms, said he would resign.

The political change -- and European Central Bank debt purchases -- pushed yields back to 6.40 percent early on Monday, but the improved sentiment seemed fragile -- yields last stood at 6.64 percent, up 14 bps on the day.

"We've seen a substantial move in yields over the past few days and the 6.40 percent level, where the first (ECB) intervention took place, is a big one, and people have started to book some profits at around that level," one trader said.

Five-year yields stood close to 10-year levels at 6.63 percent.

 

[EmpireGlobalfx]

Analysis: Europe debt fears grow, Gold rising, Italian 10-yr yields above 7 percent.

Tuesday, November 15th, 2011.


Italian 10-year yield bonds have risen above the key 7 percent level after the new Italian goverment failed to calm fears on the eurozone debt crisis, giving the perception of Italy being economically unsustainable.


Euro tumbles as well agains greenback and hits a five-week low against Yen. The euro fell 0.7 percent to $1.3527, having dropped to a session trough of $1.3495 according to Reuters data. Key downside support lies around $1.3481, a one-month low set last week.


The euro zone common currency also lost 0.9 percent to 104.17 yen, after sliding as low as 103.95 — the weakest since October 10.


Finally, safe-haven buyers have lifted gold after the Eurozone turmoil, the worries over an economic slowdown and the fears that France could be sucked into a spiraling crisis.


Spot gold was off 0.6 percent to $1,769.09 an ounce at 11:38 a.m. EST (1638 GMT), having traded as low as $1,760.04 an ounce early on Tuesday. U.S. gold for December delivery stood $8.40 lower at $1,770 an ounce. Silver eased 0.3 percent at $34.12 an ounce.



(Source: Reuters).

 

[EmpireGlobalfx]

Analysis: Stocks and Euro slide. Gold drops on USD rise.

Wednesday, November 16th, 2011.


The euro has fallen for the thirds straight session against the usd, hitting a five-week low as investors doubt of the abbility of Eurozone goverments to contain the crisis.

Despite the ECB (European Central Bank) buying Italian and Spanish bonds, this has only brought temporarily relief to the markets. The euro was down 0.3 percent at $1.3501, oil prices in London fell and stocks on Wall Street were lower.

French borrowing costs rose, with the yield premium of the French 10-year government bond over German Bunds rising to a euro-era high near 2 percent.

Wall Street has fallen. Analysts called a 0.1 percent drop in the U.S. Consumer Price Index in October a non-event for markets.

The Dow Jones industrial average .DJI was down 74.43 points, or 0.62 percent, at 12,021.73. The Standard & Poor’s 500 Index .SPX was down 7.50 points, or 0.60 percent, at 1,250.31. The Nasdaq Composite Index .IXIC was down 16.30 points, or 0.61 percent, at 2,669.90.

Gold has also fallen this Wednesday, after the greenback strenghtened. Selling gold also continued, after more Eurozone headlines negatively affected the outlook for economic recovery, being that more portfolio managers are preferring cash rather than entering into risks.

Gold, a traditional safe haven which has recently performed more like a riskier asset, was about 1 percent lower in the last three sessions.



(Source: Reuters).

 

[EmpireGlobalfx]

Spain bond sale costs soar toward danger levels

MADRID, Nov 17 - Spain paid the highest rate to sell its 10-year debt since 1997 Thursday, just shy of the 7 percent mark seen as unsustainable, as the country is swept deeper into the euro zone's debt crisis ahead of a Parliamentary election Sunday.

The euro fell and demand for safe haven German bonds jumped after auction as investor fears about the stability of the whole the currency bloc grew.

"The result was dreadful. They didn't manage to raise the full amount and the bid-to-cover is really poor. The fiscal profiles of Spain and Italy are different but their yields seem to be aligning now," said Achilleas Georgolopoulos, rates strategist at Lloyds in London.

Countries at the fringes of the euro zone saw their financing costs leap this week over fears Italy could eventually default, and the tensions spilled over into core euro zone countries such as France. That was despite ongoing support from the European Central Bank's bond purchases of periphery debt.

The Treasury managed to sell 3.6 billion euros of a new 10-year 5.85 percent coupon benchmark bond, in the middle of its 3 billion to 4 billion euro target at the auction.

Spain's government was forced to pay an average yield of 6.975 percent for the bond, the highest since 1997 when the average yield was 7.26 percent. The highest paid this year on a separate 5.5 percent coupon 10-year bond was 5.986 percent on July 21.

The bid-to-cover ratio in the Spanish auction, an indicator of investor demand, was 1.5, down from 1.8 in October for a similar bond.

A separate auction of saw France's cost of borrowing over two and four years jumped by around half a percentage point at an auction Thursday, reflecting growing concerns it may be dragged into the euro zone's sovereign debt crisis.

Spain faces a Parliamentary election Sunday, which polls show the center-right People's Party winning by a wide margin. Leader Mariano Rajoy will quickly be tasked with assuring markets Spain can take the right measures to avoid a bailout like Portugal.

 

[EmpireGlobalfx]

Euro vulnerable as contagion fears grow

(Reuters) - The euro recovered from steep falls against the dollar on Thursday as market participants took profit on short positions, but more weakness was expected as investors fretted the euro zone crisis was spreading to Germany.

The single currency slid to a seven-week low of $1.3320 on Wednesday as a weak German government bond auction sparked fears that even the safe-haven status of Europe's biggest economy could be under threat.

Short-covering helped the euro recover to trade up 0.25 percent at $1.3370 and analysts said it could edge higher short-term, particularly given that trade is thin due to the U.S. Thanksgiving holiday.

However, the extent of bearish sentiment toward the single currency left it on track to retest the October low of $1.3144, having retraced more than 78.6 percent of the rally from that level to the late October high of $1.4247.

"Short-covering may continue for a bit and we look for a correction perhaps to $1.3430 but thereafter it is heading south. It is a case of two steps down and one step up for the euro," said Carl Hammer, currency strategist at SEB in Stockholm.

The euro was also helped by a better-than-expected German business climate survey on Thursday, though traders said the data was unlikely to temper fears about the possibility the euro zone economy could face recession.

It rose briefly above $1.3400 but traders said this only provided better levels to sell the currency and reported offers between $1.3415 and $1.3450 that were likely to cap any rise.

The market looked to a meeting of leaders of Germany, France and Italy on Thursday, although few players expected progress in steps to deal with the crisis.

"With any rally in the euro there will be a lot of investors looking for new opportunities to set new short positions," said Niels Christensen, currency strategist at Nordea in Copenhagen.

"Going forward there will be a lot of focus on bond auctions and no one would be surprised if investors were reluctant to buy aggressively."

Germany's bond sale on Wednesday was its least successful since the launch of the single currency. Although unattractively low yields played a part, investors worried about the rising cost of bailouts as more euro zone countries come under attack.

German Bund futures fell to their lowest level in nearly a month, though Italian, Spanish and French bonds benefited from a slight rebound in riskier assets as European shares finance/markets/index?symbol=gb%21FTPP">.FTEU3 gained more than 1 percent. <GVD/EUR>

EURO/YEN

The euro was at 103.09 yen, having earlier hit a seven-week low of 102.92 yen, opening the way for a test of the decade low of 100.77 yen hit in early October.

Investors have also been unnerved by a rise in Belgian bond yields as the country -- without a formal government since elections last June -- struggles to agree on a deficit-slashing budget for next year.

The euro's recovery helped other riskier currencies, with the Australian dollar up 0.6 percent at $0.9744, having slid to a seven-week low of $0.9664 on Wednesday on concerns about a deteriorating global growth outlook.

The dollar slipped 0.25 percent against the yen to 77.09 yen, with its rise to a near two-week high on Wednesday, when Tokyo was on holiday, luring Japanese exporters to sell.

 

[EmpireGlobalfx]

Germany, France eye euro zone pact, markets hopeful


(Reuters) - Germany and France stepped up a drive on Monday for intrusive powers to reject national budgets in the euro zone that breach EU rules, as a market rout of European debt eased temporarily on hopes of outside help for Italy and Spain.

The OECD rich nations' economic think-tank said the European Central Bank should cut interest rates and step up its purchases of government bonds to restore confidence in the euro zone, which it said now posed the main risk to the world economy.

In Brussels, finance ministers of the 17-nation currency area meeting on Tuesday are due to approve detailed arrangements for scaling up the European Financial Stability Facility rescue fund to help prevent contagion spreading in bond markets, and to release a vital aid lifeline for Greece.

Berlin and Paris aim to outline proposals for a fiscal union before a European Union summit on December 9 increasingly seen by investors as possibly the last chance to avert a breakdown of the single currency area.

"We are working intensively for the creation of a Stability Union," the German Finance Ministry said in a statement. "That is what we want to secure through treaty changes, in which we propose that the budgets of member states must observe debt limits."

It also dismissed a report by the newspaper Die Welt that Germany and the five other euro zone states with top-notch AAA credit ratings could issue joint bonds.

Finance Minister Wolfgang Schaeuble acknowledged on Sunday that it may not be possible to get all 27 EU member states to back treaty amendments, saying agreement should be reached among the 17 euro zone members.

"That can be done very quickly," he told ARD television, adding that it only required changing an additional protocol to the EU's Lisbon Treaty.

"END OF THE EURO?"

In France, Agriculture Minister Bruno Le Maire said euro zone countries would have to give up some budget sovereignty to save the euro from hostile "speculators."

"We won't be able to save the euro if we don't accept that national budgets will have to be a bit more controlled than in the past," Le Maire told Europe 1 radio.

"We are in an economic war with a number of powerful speculators who have decided that the end of the euro is in their interest," he said.

Handing over fiscal sovereignty to the executive European Commission is politically sensitive in France, which has a strong Gaullist, nationalist tradition.

President Nicolas Sarkozy's office sought to quash a weekend newspaper report that Berlin and Paris were planning to confer "supranational powers" on Brussels, suggesting such intrusion would only apply to countries such as Greece that were under EU/IMF bailout programs.

But Le Maire, asked whether the Commission would be granted more powers over national budgets in the euro zone, said: "Why not? The French people have to realize what is at stake -- the preservation of our common currency and our sovereignty.

"We'll see if it's the council (of ministers) or some other European institution (that exercises these powers). What matters is that we ensure that budget discipline is respected within the euro zone. Otherwise the euro itself is threatened."

He acknowledged that France and Germany were still at odds over greater ECB intervention to rescue the euro but said: "We will have to find a compromise."

On financial markets, the euro regained ground after slipping below $1.33 in Asia. Italian, Spanish, French and Belgian bond yields fell, as did the cost of insuring those countries' debt against default.

But relief may be short-lived as the rally was partly due to an Italian newspaper report that the International Monetary Fund was in talks to lend Italy up to 600 billion euros -- more than its entire available war chest -- which the IMF denied.

"There are no discussions with the Italian authorities on a program for IMF financing," a spokesperson for the global lender said.

The European Commission also said Italy had not asked for any amount of money and there were no discussions at European level on aid for Rome.

IMF inspectors are due in Rome this week to study Italy's public finances after former Prime Minister Silvio Berlusconi agreed earlier this month to submit to regular monitoring of his promised austerity measures and economic reforms.

IMF TO THE RESCUE?

EU officials say some sort of IMF program could make sense for both Italy and Spain as part of a multi-pronged response involving the ECB and the euro zone rescue fund to implement reforms and restore market confidence in their debt.

A senior EU source confirmed that both Berlusconi and the European authorities had rejected an IMF offer of a 50 billion euro precautionary credit line for Italy in talks on the sidelines of the Cannes G20 summit on Nov 3. The source said the sum would have been insufficient to convince markets.

Reuters reported exclusively last week that Spain's People's party, due to form a new government by mid-December, is considering applying for IMF aid as one option for shoring up public finances. [ID:nL5E7MP2R0]

In its world economic outlook, the Organization for Economic Cooperation and Development forecast growth in the euro area will slow -- under a baseline scenario of "muddling through" -- to 0.2 percent in 2012 from an estimated 1.6 percent in 2011. The bloc's economy will then expand by 1.4 percent in 2013.

With unemployment set to rise and inflation to fall, the OECD said the choice for the ECB was clear.

"This calls for ... a substantial relaxation of monetary conditions," the OECD said.

Banks would need to be well capitalized and policies put in place for sovereigns to finance themselves at reasonable rates.

"This calls for rapid, credible and substantial increases in the capacity of the EFSF together with, or including, greater use of the ECB balance sheet," the OECD said.

OECD chief economist Pier Carlo Padoan said current plans to leverage the euro zone bailout fund were insufficient.

"The numbers we have seen floating around are not enough," Padoan told a news conference, adding that what was needed was a multiple of what was currently on the table.

Euro zone leaders initially planned to leverage the EFSF up to 1 trillion euros, but the fund's head has said it is now unlikely to achieve that. The fund has had trouble selling its own bonds to raise funds and has yet to attract the pledges it hoped to get from countries with sovereign wealth to invest.

 

[EmpireGlobalfx]

Eurozone pact fails to restore confidence: Euro, Stocks and Gold fall.

Monday, December 12th, 2011.



The European summit deal to strengthen budget discipline has failed to restore the confidence in the financial markets, making the common currency, stocks, and gold fall while borrowing costs for Italy and Spain rose.



Italian 10-year yields briefly threatened to hit 7 percent, a level seen as unsustainable, before peaking at more than 6.8 percent. European Central Bank intervention helped yields to fall back to 6.60 percent — still 20 basis points higher on the day.


Wall Street fell about 2 percent.


The Dow Jones industrial average .DJI was down 225.16 points, or 1.85 percent, at 11,959.10. The Standard & Poor’s 500 Index .SPX was down 25.71 points, or 2.05 percent, at 1,229.48. The Nasdaq Composite Index .IXIC was down 48.01 points, or 1.81 percent, at 2,598.84.



EURUSD pair fell 1.5%, while Gold dropped 3% on technical selling. Heavy sell-stops below $1,700 an ounce sent the metal to its lowest level since late October — as equity investors liquidated gold positions to cover equity and commodity losses.



(Source: Reuters.)

 

[EmpireGlobalfx]

EURCHF opportunity with SNB intervention.


Monday, January 16th, 2012.


With the Swiss National Bank intervening last year and attempting to set a floor in the EUR/CHF cross at 1.20 the trading community is divided on whether or not the SNB will be successful in holding that floor.

When you couple that information with the likelihood that the membership of European Union will change within this calendar year an interesting hedging opportunity arises.



The SNB intervention can happen at literally anytime and many are forecasting a 1.35 if not a 1.40 goal for the new SNB floor.



This is also potentially a position that could be opened and closed repeatedly for incremental profit.



This entire situation is fascinating for the long time currency trader/observer who correlates the SNB and the CHF with sound currency and hawkish monetary policy. The opposite has become true in Switzerland out of sheer self preservation.



Switzerland is a country that relies heavy upon exports and tourism to support their economy. If they do not intervene they will definetly see hit to their GDP.



EUR/CHF fell hard on Friday as the pressure continues against the Euro as a whole. The EU saw nine countries get downgraded in the waning hours of trading, so the reaction isn’t necessarily baked into the chart currently. With this in mind, the rumors pushed the market down most of the day.



However, the Swiss National Bank has put in a “floor” at the 1.20 level just below, so selling isn’t possible, even in this environment. The intervention that almost has to happen at that level will be brutal and fast. However, the Euro is a bit difficult to own. The bounce that comes however could be very profitable if you see that intervention



(Sources: Milwaukee Story / FX Empire | Forex News, Analysis, Charts,Tools and Forex Brokers.)



Please note that this article does NOT constitute an investing advice.