EUR Rallies on Higher Stocks, Lower Periphery Yields, Spain Auction, Nowotny... |
The AUD, GBP as well as the EUR were stronger versus our safe haven currencies.
Here’s a quick round-up of the important stories as they pertain to the EUR.
1. Spain Debt Auction
Spain sold 4.4 billion euro ($6.2 billion) of 12- and 18-month T-bills, which was close to the top of its range of 3.5 billion to 4.5 billion euro, with demand higher for the longer dated paper.
While borrowing costs at the auction shot up compared to the last time Spain offered similar dated maturities, it was still a relief for the market as it shows demand is still there for Euro-zone periphery debt.
The Treasury sold 3.8 billion euros of the 12-month T-bill, paying an average yield of 3.702 percent compared with 2.695 percent at the previous auction last month. The 18-month bills sold at a 3.912 percent yield after 3.260 percent at the previous outing, with 661 million euros auctioned at a bid-to-cover ratio of 5.5, up from 3.9 last month.
2. Nowotny’s Comments on Short Term Default
Mr. Nowotny, the head of Austria’s central bank seemed to contradict ECB President Trichet in an interview with CNBC as he said that “there are some proposals that deal with a very short-lived selective situation that will not have major negative consequences.” A full default carries “grave consequences” but there was a “full range” of options to be considered.
If the ECB walks back its firm insistance that it cannot take any debt deemed in “default” as collatarol that could open the door for a resolution on Thursday from the EU Summit.
We continue to have some positive feeler put out there that some kind of deal will be reached, with the Greek finance minister saying a deal is “attainable.”
3. Periphery Yields Ease
Italian and Spanish 10-year yields fell back today from their euro-era highs yesterday. With equities climbing as well, it certainly reversed the risk-off sentiment that started the week. However, the true direction of the market will not be revealed until Thursday, and part of today’s action, like in the EUR/CHF could be a short squeeze on Euro bears.
In the NY session, we have data on housing starts and building permits, the Bank of Canada interest rate statement, as well as earnings from important companies such as Goldman Sachs, BoA, Apple, Coca-Cola, and Johnson & Johnson.
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