Financial Communique » government securities

Spain and France sold government securities for 8.1 billion EUR

Viliyana Filipova — Thu, 01 Dec 2011 11:25:15 +0000

Spain and France held a successful auction of government securities, gaining 8.1 billion EUR, a day after six central banks, led by the Federal Reserve (Fed) lowered the cost of dollar funding for European banks. The auctions bond yields fell across the Eurozone. Spain sold bonds for 3.75 billion EUR in yield ranging from 5.19 to 5.54% and the ratio of demand / supply of 2 to 1. France, which enjoys top-notch AAA credit rating, sold bonds for 4.3 billion EUR in yield of 3.18 percent – lower than in the previous auction in Paris on November 3rd. The sale of bonds was to test investor confidence after the Fed, European Central Bank (ECB) and Bank of Canada, Japan, Switzerland and Britain dropped the price of a coordinated emergency loans in dollars to European banks.
“Both auctions were pretty good”, said Hugh Worthington, strategist at Barclays Capital in London. “Yields are higher than they want, but the auctions were strong. Actions of central banks yesterday definitely helped.” France sold securities with maturities in October 2017, October 2021, April 2026 and April 2041, while Spain sold bonds maturing in April 2015 and January 2016 and January 2017.
On November 17th, spread between 10-year French bonds and equivalent German bonds reached a record 204 basis points, while in April the premium on French bonds was only 28 points.

S&P: Asian securities are protected from Greek crisis

Viliyana Filipova — Sat, 01 May 2010 15:16:34 +0000

Government securities (GS) of developing Asian economies are protected from the Greek crisis and will perform well this year thanks to low levels of debt in these countries and because of the rapid growth of their economies. It predicts the international credit rating agency Standard & Poor’s, quoted by Bloomberg. Its economists point out that while government bonds of developed countries are less reliable because they are exposed to a deepening crisis of sovereign debt of Greece. William Hess, director of the division of Standard & Poor’s sovereign ratings for Asia, believes that the interest of investors to the region will increase, but the direct risk of transferring the debt crisis of Europe and Asia still remains limited. Asia surpassed other regions in contributing to the recovery of global economy this year, which happens for the first time in history, according to analysts at the International Monetary Fund (IMF). Countries like China, India and South Korea have caused the region to gain a record amount of foreign exchange reserves. This is the response from the Asian crisis in 1997-98, which showed that their central banks can not ensure the stability of local currencies and financial system. Now, the dynamic rates of economic growth in Asian countries, coupled with their low levels of debt, make them an attractive investment alternative. These factors will promote the strengthening of capital flows and the reduction in risk premiums in Asia, considered from Standard & Poor’s.
The IMF expects emerging economies in the Asian region, excluding Japan, Australia and New Zealand to mark the general economic growth of 8.5 percent this year and 8.4 percent the next. This is well above the forecast for growth this year from 2.2 percent in developed economies and one percent in the euro area. The credit rating of government bonds in China and South Korea is on the scale of A1 Moody’s, which is his fifth highest investment grade and more than that of Greece. This is Indonesia’s Ba2, which is its highest level in 11 years and two degrees below investment level. The budget deficit of South Korea last year was 4.1 percent of its gross domestic product and that of China amounted to 2.8%. Even less is the hole in the budget of Indonesia – only 1.6 percent of GDP in 2009

U.S. government securities with worst year

Viliyana Filipova — Sat, 02 Jan 2010 02:12:11 +0000

The U.S. government securities (GS) recorded its worst year since 1978, after the government expedite the issuance of new debt to help restore the economy from the deepest recession in six decades. According to the index of Bank of America Merrill Lynch government securities have lost 3.6 percent this year – the worst performance for at least 1978, when he began calculating the index. Holders of U.S. debt, however, have achieved returns of 81% in the last decade, according to this index, while the index for the same period Standard & Poor’s 500, including dividends and has lost 8 percent of its value. President Obama takes unprecedented amounts of funding for different programs. Only last week the Treasury sells government bonds worth 118 billion dollars. The issued government debt outstanding reached a record 7.17 trillion. dollars in November after the end of last year was a level of 5.80 trillion. “This is the largest increase in budget deficit for one year, excluding periods of wars and depressions. Realistic expectations for economic recovery and the accompanying increase in interest rates increased the yield of government securities, which automatically means lower prices, “says Christian Kari, a senior analyst at Societe Generale SA, Tokyo. According to him, prices could fall even more.
Since the beginning of the year the yield on the basic 10-year government bonds rose by 1.59 points to 3.80 percent in early London trading today. “The volume of supply will remain a problem next year,” said David Shnautts strategist at Commerzbank AG, Frankfurt. “Despite the large supply and the prospects for economic recovery, however, expect the yield on government securities to be structurally lower, as banks are likely to increase their investments in safe and liquid assets such as government securities,” he finishes. Yield spread between short-and long-term government securities barometer for the economy, extending a record earlier this month after investors agreed that the emerging recovery would cause inflation and reduce the demand for government debt, pushing the yield on long-term bonds. The difference in yield between 2-year and 10-year bonds reached a record 2.88 percentage points on December 22 by only 1.45 percentage points at the beginning of the year. Spread is currently at a level of 2.71 points. Spread between 10-year government bonds and government bond inflation-protected with the same maturity rose to 2.43 percentage points yesterday – the highest level since July 2008 onwards. This spread is a measure of inflation expectations and shows that the recovering economy can change attitudes and lead to even higher yield (respectively, lower prices) of government bonds.