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| Eurozone crisis live: Spain passes crucial bond auction, as IMF firewall gets more support | Eurozone crisis live: Spain passes crucial bond auction, as IMF firewall gets more support |
| (40 minutes later) | |
| 11.40am: The prospect of fresh aid for Spanish banks was raised, and dismissed, at the European Commission's regular media briefing in Brussels. | |
| EC spokesman Olivier Bailly told reporters that there are still "no plans" to use the European Financial Stability Facility , or its replacement the European Stability Mechanism, to pump new capital into the Spanish banking sector. | |
| Such a move would only happen if the EC reckoned that a banking sector could not recapitalise itself through the equity markets, or through a bailout from its national government, Bailly explained, adding: | |
| This is not the case for Spain. This is not necessary for Spain, we believe. | |
| Bailly's optimism is not mirrored in the financial community, though. Analysts point to the huge, unquantified, levels of bad debt on the books of Spain's banks following the (ongoing) property slump. Carsten Brzeski of ING has estimated that €80bn might be needed to clean up the mess. | |
| The Spanish government could provide the funds itself, taking stakes in retail banks in return for cash injections. But as its own borrowing needs are so great, that might push Madrid to the point of needing its own bailout.... | |
| 11.09am: The latest opinion polling from Greece is rather interesting – it suggests that the two main parties could manage to win a wafer-thin majority between them after next month's election. | 11.09am: The latest opinion polling from Greece is rather interesting – it suggests that the two main parties could manage to win a wafer-thin majority between them after next month's election. |
| The survey, conducted by polling group, found that the right-wing New Democracy party would win 110 seats, while the socialist PASOK party would hold onto 41. With 300 seats in the Greek parliament, that would give the two parties a majority of just 1 seat -- assuming that they could form a coalition. | The survey, conducted by polling group, found that the right-wing New Democracy party would win 110 seats, while the socialist PASOK party would hold onto 41. With 300 seats in the Greek parliament, that would give the two parties a majority of just 1 seat -- assuming that they could form a coalition. |
| An ND-Pasok coalition is the 'best-case scenario' the European establishment, really, as both parties support Greece's current financial aid plan. | An ND-Pasok coalition is the 'best-case scenario' the European establishment, really, as both parties support Greece's current financial aid plan. |
| The poll also found that many of Greece's smaller parties enjoy solid support. With New Democracy and Pasok winning just 37% of the vote in total, another eight parties would win at least 3% of the vote - enough for at least one seat under Greek election rules. Seven of those parties say they oppose Greece's current austerity plan. | The poll also found that many of Greece's smaller parties enjoy solid support. With New Democracy and Pasok winning just 37% of the vote in total, another eight parties would win at least 3% of the vote - enough for at least one seat under Greek election rules. Seven of those parties say they oppose Greece's current austerity plan. |
| 10.32am: Yusuf Heusen, sales trader at IG Index, reckons this morning's Spanish auction was a "damp squib", because the results contain something for both optimists (plenty of debt sold, strong demand) and pessimists (higher yields). | 10.32am: Yusuf Heusen, sales trader at IG Index, reckons this morning's Spanish auction was a "damp squib", because the results contain something for both optimists (plenty of debt sold, strong demand) and pessimists (higher yields). |
| He adds: | He adds: |
| Regardless of today's sale, Spain remains the country to watch, given its size and the steady deterioration in both its banking system and economic situation. | Regardless of today's sale, Spain remains the country to watch, given its size and the steady deterioration in both its banking system and economic situation. |
| 10.23am: In other bond sale news, France just sold almost €8bn of debt. That is close to the maximum on offer (another €3bn is being sold separately). | 10.23am: In other bond sale news, France just sold almost €8bn of debt. That is close to the maximum on offer (another €3bn is being sold separately). |
| The sale included €2.7bn of 5-year debt. which sold at a yield of 1.83%, up from 1.78% at a similar auction last month. | The sale included €2.7bn of 5-year debt. which sold at a yield of 1.83%, up from 1.78% at a similar auction last month. |
| Probably a relief for Nicolas Sarkozy ahead of presidential election voting this weekend. | Probably a relief for Nicolas Sarkozy ahead of presidential election voting this weekend. |
| 10.16am: There's little cheer in Spain following the debt auction – the Spanish IBEX 35 index has now turned negative, down 35 points or 0.5%, having been up as much as 0.7% earlier. | 10.16am: There's little cheer in Spain following the debt auction – the Spanish IBEX 35 index has now turned negative, down 35 points or 0.5%, having been up as much as 0.7% earlier. |
| Buy the rumour, sell the fact? | Buy the rumour, sell the fact? |
| 9.52am: The early reaction in the financial markets is that the Spanish auction (results at 9.45am) is a qualified success that shouldn't detract from its deep economic problems. | 9.52am: The early reaction in the financial markets is that the Spanish auction (results at 9.45am) is a qualified success that shouldn't detract from its deep economic problems. |
| The bottom line is that Spain has successfully raised the €2.5bn it needed, and a bit more on top. Demand, as measured by the bid-to-cover ratio, was also firm. But the rise in the yield on the 10-year bonds underlines the concerns over prime minister Mariano Rajoy's efforts to cut Spanish borrowing without causing permanent damage to its economy. | The bottom line is that Spain has successfully raised the €2.5bn it needed, and a bit more on top. Demand, as measured by the bid-to-cover ratio, was also firm. But the rise in the yield on the 10-year bonds underlines the concerns over prime minister Mariano Rajoy's efforts to cut Spanish borrowing without causing permanent damage to its economy. |
| Here's some early reaction to the auction: | Here's some early reaction to the auction: |
| Peter Chatwell of Credit Agricole: | Peter Chatwell of Credit Agricole: |
| It's a mixed auction. From the treasury's perspective, it is good, selling the maximum amount…but, given the market volatility, I would not read too much into this. It's job done for this round. | It's a mixed auction. From the treasury's perspective, it is good, selling the maximum amount…but, given the market volatility, I would not read too much into this. It's job done for this round. |
| Marc Ostwald of Monument Securities: | Marc Ostwald of Monument Securities: |
The most encouraging part is they sold more of the 10-year than they did of the two-year…What does it tell us? Well, they got over this hurdle and the next one is not far away. | The most encouraging part is they sold more of the 10-year than they did of the two-year…What does it tell us? Well, they got over this hurdle and the next one is not far away. |
| Nicholas Spiro of Spiro Sovereign Strategy: | Nicholas Spiro of Spiro Sovereign Strategy: |
| This week's Spanish auctions were a relative success, but this may be a temporary reprieve more than anything else. | This week's Spanish auctions were a relative success, but this may be a temporary reprieve more than anything else. |
| And Spain's long-term problems are not solved by one or two debt auctions, of course. Unemployment is still painfully high (over 23%) and the country is still heading into a deep recession this year..... as Sony Kapoor of the ReDefine thinktank pointed out on Twitter: | And Spain's long-term problems are not solved by one or two debt auctions, of course. Unemployment is still painfully high (over 23%) and the country is still heading into a deep recession this year..... as Sony Kapoor of the ReDefine thinktank pointed out on Twitter: |
| #Spain's problems go much beyond a good bond auction or a bad one. Little hope of #employment picking up, deteriorating #assets, #austerity | #Spain's problems go much beyond a good bond auction or a bad one. Little hope of #employment picking up, deteriorating #assets, #austerity |
| — Sony Kapoor (@SonyKapoor) April 19, 2012 | — Sony Kapoor (@SonyKapoor) April 19, 2012 |
| 9.45am: The results of the Spanish debt auction are in! And the good news is that Spain has actually sold slightly more debt than planned -- €2.541bn, compared with a maximum target of €2.5bn. | 9.45am: The results of the Spanish debt auction are in! And the good news is that Spain has actually sold slightly more debt than planned -- €2.541bn, compared with a maximum target of €2.5bn. |
| The bad news is that the yield on the 10-year bond rose, but it did remain below the crucial 6% level. | The bad news is that the yield on the 10-year bond rose, but it did remain below the crucial 6% level. |
| Here are the results: | Here are the results: |
| For the 10-year bonds: €1.425bn was sold, at a maximum yield of 5.788% (up from 5.4%) The bid-to-cover ratio was 2.4, up from 2.2 last time [that measures how much demand there was] | For the 10-year bonds: €1.425bn was sold, at a maximum yield of 5.788% (up from 5.4%) The bid-to-cover ratio was 2.4, up from 2.2 last time [that measures how much demand there was] |
| For the two-year bonds: €1.116bn was sold, at a maximum yield of 3.463% The bid-to-cover ratio was 3.3, up from 2.0 last time. | For the two-year bonds: €1.116bn was sold, at a maximum yield of 3.463% The bid-to-cover ratio was 3.3, up from 2.0 last time. |
| Reaction to follow | Reaction to follow |
| 9.37am: On a lighter note...who'd like to see a picture of Angela Merkel with several multicoloured parrots on her head? | 9.37am: On a lighter note...who'd like to see a picture of Angela Merkel with several multicoloured parrots on her head? |
| Merkel Smiling.... twitter.com/russian_market… | Merkel Smiling.... twitter.com/russian_market… |
| — Russia Business (@russian_market) April 19, 2012 | — Russia Business (@russian_market) April 19, 2012 |
| The photo was taken a couple of days ago at a bird park in Marlow, northern Germany (according to our picture library, the birds are lories). | The photo was taken a couple of days ago at a bird park in Marlow, northern Germany (according to our picture library, the birds are lories). |
| 9.20am: The Spanish debt auction begins in just 10 minutes time, and we should get the results pretty quickly. | 9.20am: The Spanish debt auction begins in just 10 minutes time, and we should get the results pretty quickly. |
| One hedge fund manager is taking a cynical view of the whole affair, suggesting on Twitter that the auction results will be massaged* to create a successful-looking sale: | One hedge fund manager is taking a cynical view of the whole affair, suggesting on Twitter that the auction results will be massaged* to create a successful-looking sale: |
| If they can't stage-manage a decent Spanish auction, we're really in the shit. Expect something comfortable-looking, irrelevant. | If they can't stage-manage a decent Spanish auction, we're really in the shit. Expect something comfortable-looking, irrelevant. |
| — P M (@Pawelmorski) April 19, 2012 | — P M (@Pawelmorski) April 19, 2012 |
| * - how could this be done? Spanish banks bidding heavily for their national sovereign debt would do the trick. | * - how could this be done? Spanish banks bidding heavily for their national sovereign debt would do the trick. |
| 9.15am: Italy's industrial sector continued to decline in February, according to data just released. | 9.15am: Italy's industrial sector continued to decline in February, according to data just released. |
| Industrial orders across Italian factories fell by 2.5% month-on-month in February, and a hefty 13.2% lower than a year ago. | Industrial orders across Italian factories fell by 2.5% month-on-month in February, and a hefty 13.2% lower than a year ago. |
| 8.48am: Overnight, the International Monetary Fund announced that it has now raised $320bn for its new firewall to protect the world economy from the dangers of the eurozone debt crisis. | 8.48am: Overnight, the International Monetary Fund announced that it has now raised $320bn for its new firewall to protect the world economy from the dangers of the eurozone debt crisis. |
| Christine Lagarde, managing director of the IMF, said that $34bn of new pledges were received yesterday, including promises of loans from Poland and Switzerland. It means the IMF is now more than half-way to its target of $600bn of new loans from the international community (although the majority of new funding so far comes from the eurozone itself). | Christine Lagarde, managing director of the IMF, said that $34bn of new pledges were received yesterday, including promises of loans from Poland and Switzerland. It means the IMF is now more than half-way to its target of $600bn of new loans from the international community (although the majority of new funding so far comes from the eurozone itself). |
| Lagarde urged other countries to make their own pledges, saying: | Lagarde urged other countries to make their own pledges, saying: |
| Ensuring that the Fund has sufficient resources to tackle crises and to promote global economic stability is in the interests of all our members. | Ensuring that the Fund has sufficient resources to tackle crises and to promote global economic stability is in the interests of all our members. |
However, reaching the full target still looks very difficult. America is still declining to contribute more, with Treasury secretary Tim Geithner reiterating yesterday that the US had done its bit. | However, reaching the full target still looks very difficult. America is still declining to contribute more, with Treasury secretary Tim Geithner reiterating yesterday that the US had done its bit. |
| Here's a list of the commitments that we know about (some amounts are approximate): | Here's a list of the commitments that we know about (some amounts are approximate): |
| • The eurozone: $200bn • Japan: $60bn • Sweden: $10bn • Norway: $9bn • Denmark: $7bn • Poland: $9bn • Switzerland: "a substantial amount" (probably approaching $26bn) | • The eurozone: $200bn • Japan: $60bn • Sweden: $10bn • Norway: $9bn • Denmark: $7bn • Poland: $9bn • Switzerland: "a substantial amount" (probably approaching $26bn) |
| 8.23am: In the currency markets, the pound has jumped in early trading. It hit a new 19-month high of €1.2245 against the euro, and a five-month high of $1.6071 against the US dollar. | 8.23am: In the currency markets, the pound has jumped in early trading. It hit a new 19-month high of €1.2245 against the euro, and a five-month high of $1.6071 against the US dollar. |
| The trigger appears to be yesterday morning's Bank of England minutes, which revealed that long-time dove Adam Posen had surprisingly ditched his call for more quantitative easing. This means the Banks' Monetary Policy Committee is much less likely to increase its asset purchase scheme in the coming months. | The trigger appears to be yesterday morning's Bank of England minutes, which revealed that long-time dove Adam Posen had surprisingly ditched his call for more quantitative easing. This means the Banks' Monetary Policy Committee is much less likely to increase its asset purchase scheme in the coming months. |
| Speaking of Threadneedle Street... a former MPC member, David Blanchflower, has accused governor Mervyn King of ruling the Bank 'like a tyrant'. Writing in the New Statesman, Blanchflower claims: | Speaking of Threadneedle Street... a former MPC member, David Blanchflower, has accused governor Mervyn King of ruling the Bank 'like a tyrant'. Writing in the New Statesman, Blanchflower claims: |
| King has controlled the Bank with an iron fist, slaying any dissenters in his path. He follows in the tradition established by Montagu Norman, who was governor from 1920 to 1944: it's his way or the highway. I recall a meeting in which King told the Treasury representative to tell the then prime minister to shut up. I have never worked at a place that had such low morale. | King has controlled the Bank with an iron fist, slaying any dissenters in his path. He follows in the tradition established by Montagu Norman, who was governor from 1920 to 1944: it's his way or the highway. I recall a meeting in which King told the Treasury representative to tell the then prime minister to shut up. I have never worked at a place that had such low morale. |
| 8.03am: European stock markets have opened higher, with the major indices gaining between 0.5% and 0.7%. Nothing spectacular, but a sign of optimism ahead of the Spanish auction. | 8.03am: European stock markets have opened higher, with the major indices gaining between 0.5% and 0.7%. Nothing spectacular, but a sign of optimism ahead of the Spanish auction. |
| 7.55am: Here's some early comments from market analysts on the upcoming Spanish auction (see 7.43am for details): | 7.55am: Here's some early comments from market analysts on the upcoming Spanish auction (see 7.43am for details): |
| Lyn Graham Taylor of Rabobank: (via CNBC): | Lyn Graham Taylor of Rabobank: (via CNBC): |
| I wouldn't say that Spain is heading the Greece way but definitely we are back in crisis mode. Spanish yields are rapidly on the increase and have been over the last couple of weeks. | I wouldn't say that Spain is heading the Greece way but definitely we are back in crisis mode. Spanish yields are rapidly on the increase and have been over the last couple of weeks. |
| We are really in wait and watch mode now to see what the next steps are that will be taken with regards to helping Spain out, I guess the most unlikely of those being in the first step of bank recapitalisations with the funds potentially coming from the EFSF (The European Financial Stability Facility). | We are really in wait and watch mode now to see what the next steps are that will be taken with regards to helping Spain out, I guess the most unlikely of those being in the first step of bank recapitalisations with the funds potentially coming from the EFSF (The European Financial Stability Facility). |
| Michael Hewson of CMC Markets: | Michael Hewson of CMC Markets: |
| Markets are becoming increasingly worried that in the absence of a much bigger firewall than the one which is currently available Spain will find itself in a similar situation to Greece, only without the luxury of a bailout to fall back on. | Markets are becoming increasingly worried that in the absence of a much bigger firewall than the one which is currently available Spain will find itself in a similar situation to Greece, only without the luxury of a bailout to fall back on. |
| The auction should succeed given the amount but of particular interest will be the yield achieved and bid to cover ratio. Anything above 6% could put downside pressure on the single currency. | The auction should succeed given the amount but of particular interest will be the yield achieved and bid to cover ratio. Anything above 6% could put downside pressure on the single currency. |
| David Morrison of GFT: | David Morrison of GFT: |
| Investors remain nervous...if yields jump back over 6.0 percent, then the European debt crisis will return centre stage, with Spain the leading lady. | Investors remain nervous...if yields jump back over 6.0 percent, then the European debt crisis will return centre stage, with Spain the leading lady. |
| 7.43am: This morning's auction will see Spain attempt to raise up to €2.5bn by selling two types of bond – one matures in 2014, and the other in 2022. | 7.43am: This morning's auction will see Spain attempt to raise up to €2.5bn by selling two types of bond – one matures in 2014, and the other in 2022. |
| The 10-year bonds will be most closely watched, I think, as long-term debt is seen as a better measure of market confidence. | The 10-year bonds will be most closely watched, I think, as long-term debt is seen as a better measure of market confidence. |
| Analysts will look at four factors when evaluating the auction: how much debt was sold; how oversubscribed the auction was (bid-to-cover ratio); what interest rate (the yield) Spain has agreed to pay; and whether investors favoured the 2014 bond over the 2022 one. | Analysts will look at four factors when evaluating the auction: how much debt was sold; how oversubscribed the auction was (bid-to-cover ratio); what interest rate (the yield) Spain has agreed to pay; and whether investors favoured the 2014 bond over the 2022 one. |
| On Tuesday, Spain held an auction of short-term bonds. Yields jumped, but the auction was still seen as a success because the Spanish authorities actually sold more than their maximum target of €3bn. | On Tuesday, Spain held an auction of short-term bonds. Yields jumped, but the auction was still seen as a success because the Spanish authorities actually sold more than their maximum target of €3bn. |
| 7.34am: Here's today's agenda, which shows that France and the UK are also holding government debt auctions this morning. | 7.34am: Here's today's agenda, which shows that France and the UK are also holding government debt auctions this morning. |
| • Italian industrial sales+orders data - 9am BST / 10am CET • Spanish €2.5bn bond auction - from 9.30am BST • French €11bn bond auction - morning • UK £1.35bn bond auction - morning • IMF's Christine Lagarde holds press conference - 1.45pm BST / 8.45am EST • World Bank's Robert Zoellick holds press conference - 2.45pm BST / 9.45am EST • Eurozone consumer confidence data - 3pm BST / 4pm CET | • Italian industrial sales+orders data - 9am BST / 10am CET • Spanish €2.5bn bond auction - from 9.30am BST • French €11bn bond auction - morning • UK £1.35bn bond auction - morning • IMF's Christine Lagarde holds press conference - 1.45pm BST / 8.45am EST • World Bank's Robert Zoellick holds press conference - 2.45pm BST / 9.45am EST • Eurozone consumer confidence data - 3pm BST / 4pm CET |
| 7.30am: Good morning, and welcome to today's rolling coverage of the eurozone debt crisis. | 7.30am: Good morning, and welcome to today's rolling coverage of the eurozone debt crisis. |
| Spain dominates the attention, with an auction of long-term debt taking place in around two hours time. The sale is a test of market confidence in the Spanish economy and its fiscal plans, following the escalation of concerns over the euro crisis in recent dats. | Spain dominates the attention, with an auction of long-term debt taking place in around two hours time. The sale is a test of market confidence in the Spanish economy and its fiscal plans, following the escalation of concerns over the euro crisis in recent dats. |
| We'll also be watching events in Washington, where the International Monetary Fund and the World Bank are holding another day of meetings to discuss the state of the world economy. | We'll also be watching events in Washington, where the International Monetary Fund and the World Bank are holding another day of meetings to discuss the state of the world economy. |
| And on the economics front, new data will show how eurozone consumer confidence is faring, and the state of Italian industry. | And on the economics front, new data will show how eurozone consumer confidence is faring, and the state of Italian industry. |