Bond investors seek safety before Greek vote
LONDON, May 3 (Reuters) – Failure by the two main Greek
parties to secure a comfortable majority in Sunday’s elections
could put pressure on wider euro zone peripheral debt markets by
casting doubt over popular tolerance of further reform.
Without implementing the austerity prescribed by its
international lenders, Greece would cease to receive bailout
funds, paving the way for a second debt restructuring and, some
analysts say, threatening its membership of the euro.
German Bunds hit record high after euro zone PMIs
LONDON, May 2 (Reuters) – German Bund futures hit record
highs on Wednesday after euro zone manufacturing data raised
concerns that the euro crisis is spreading to the region’s key
economies.
The euro zone’s manufacturing sector slipped further into
decline last month as a downturn that started in the periphery
appeared to take root among core members France and Germany, a
survey showed on Wednesday.
Bunds reverse losses after weak euro zone PMI
LONDON, May 2 (Reuters) – German Bund futures reversed
losses on Wednesday as euro zone manufacturing data poured cold
water on optimism regarding the global economy sparked by an
improvement in U.S. and Asian factory activity numbers.
The euro zone’s manufacturing sector slipped further into
decline last month as a downturn that started in the periphery
appeared to take root among core members France and Germany, a
survey showed on Wednesday.
Spanish ratings cut drives bond yields to 6 pct
LONDON, April 27 (Reuters) – Spanish government bond yields
rose to the 6 percent danger level on Friday after a credit
rating downgrade stoked fears about the euro zone’s heavy
debtors, with a smooth Italian debt auction providing only
limited relief.
Standard & Poor’s cut Spain’s credit rating by two notches
to BBB+ late on Thursday and maintained a negative outlook,
citing the deterioration of government finances and weakness in
the Spanish banking sector.
Bets on further ECB easing creep into market
LONDON (Reuters) – Money markets appear to be expecting that the European Central Bank’s next move will be to ease monetary policy again rather than head for the exit from its ultra-loose monetary policy.
On Thursday, Euribor futures were higher across contracts, implying lower bank-to-bank rates down the line, which would reflect lower ECB interest rates, while overnight Eonia has also been grinding lower.
German yields rise as long-term debt sale struggles
LONDON, April 25 (Reuters) – German government bond yields
rose on Wednesday after an auction of long-term debt drew less
in bids than the amount on offer, a sign that flows into
safe-haven assets may have been exaggerated.
While for the moment investors appear reluctant to add to
their Bund investments, bond strategists do not rule out further
tests of record low yield levels given the myriad of obstacles
the euro zone faces in solving its debt crisis.
Bunds fall as German long-bond sale struggles
LONDON, April 25 (Reuters) – Bund futures fell on Wednesday
and some investors shunned a sale of new German 32-year bonds as
the relatively low risk they carry proved insufficient to
compensate for ultra-low returns.
Germany’s 2.405 billion euro sale of new 30-year government
bonds drew fewer bids than the total volume offered, meaning
the sale was technically uncovered.
Long bond sale puts Bunds under pressure
LONDON, April 25 (Reuters) – Bund futures eased on Wednesday
as investors readied for a sale of German 32-year debt at which
they must weigh the relative security of paper from the euro
zone’s largest economy against the new bond’s long maturity and
ultra-low Bund yields.
Germany is due to auction 3 billion euros of 2044 bonds in a
sale some say could struggle due to the unattractive return
offered, but with political uncertainty in Europe providing a
favourable backdrop.
“It’s a strange one because in normal circumstances you would
say with yields where they are, the appetite for longer-dated
stuff might be pretty low,” sad Gary Jenkins, director of
Swordfish Research.
“But the truth is, at the moment, I think we are in a
situation where people will still want what is deemed risk-free.
There is a technical reason for requiring it (from financial
institutions like pension funds) and there is the other reason
of being able to sleep at night.”
Netherlands at core of the crisis
The Netherlands has become the latest country to come into the firing line of the euro zone crisis.
The cost of insuring five-year Dutch debt against default jumped to its highest since January as the government’s failure to agree on budget cuts spiraled into a political crisis and cast doubt over its support for future euro zone measures.
The dangers of a bloated ECB balance sheet
Central balance sheets across the industrialized world have increased rapidly in response to the financial crisis, as recently noted on this blog. In Europe, the balance sheet of the ECB and the 17 national central banks that share the euro currency has grown to around 3 trillion euros after the ECB injected more than a trillion into the market in 3-year loans and loosened its collateral standards.
At above 30 percent of gross domestic product, the ECB’s balance sheet has overtaken that of the Bank of Japan, which has been grappling with deflation for some two decades and started from a much higher level. It is also bigger than that of the U.S. Federal Reserve, which has aggressively responded to two financial crises in five years by tripling the size of its balance sheet to nearly $3 trillion today.
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