Rabu, 04 April 2012

Spain really is focus as their bond auction essentially failed today , focus on Greece and the impact of austerity


11.47am: Spanish debt is taking more of a pummelling -- with its 10-year bond yields just breaking above the 5.7% mark (from below 5.5% before this morning's auction).
(That means the value of those bonds has fallen this morning, as investors perceive that Spanish debt is riskier).
11.36am: Over to Greece, where our correspondent, Helena Smith, says there is more alarming news on the tragic effects of growing poverty in the country where the debt crisis began.
Helena writes:
In another sign of the human dimension Greece's debt drama is having, the nation awoke to two pieces of shocking news this morning – a man killing himself in front of the Greek parliament and the most damning proof yet that children are also paying a heavy price for the country's economic woes.
The man, a 77-year-old pensioner, died in Syntagma Square, the capital's central plaza, in front of disbelieving passers by. Greek media reports linked the death to the pensioner's fear of debts. "I am leaving so as not to pass on debts to my children," he was quoted as saying by theNewsit news portal, which reported that neighbours spoke of the tragic figure as "upstanding and polite."
The suicide has encapsulated the growing desperation of Greece's older generation whose pensions and benefits have been heavily cut by a government desperately trying to rein in run-away public finances.
Athens is under unprecedented pressure by its 'troika' of international creditors [the EU, ECB and IMF] to trim a public deficit that stood at just over 15% in 2009, when the crisis erupted, to 3% by 2015 when its latest package of rescue loans end.

The news coincided with the release of a report by the United Nations Children's Fund (UNICEF) which estimates that some 439,000 children now live under the poverty line in Greece – the equivalent of 23% of the total population compared to an average 20.5% in other European countries.
The report cited the growing number of cases of underfed children fainting in schools, saying poverty was more pronounced in single-parent families.
The poverty levels are more stunning given Greece's dramatically declining population. Children as a proportion of the country's population have dwindled from 32% in 1961 to 17.4% in 2011, according to the report. More than a third of Greece's entire population are living under the poverty line compared to a fifth before the outbreak of the crisis.

10.55am: In the reader comments below, jimriddle called the auction correctly:
Odds on that the spanish bond auction will be undersubscribed...
After yesterday, who'd want some of that?
While KhakiSuit and Stomachtrouble both identified the 2020 Spanish bond as the key factor to watch:
As KhakiSuit explains:
The six-month / two-year bond rates are - while not completely irrelevant - more subject to very short-term trading thinking.
If anything, rolling over your debt with such short-term bonds indicates to me that these countries know that the game will soon be up... They can't even afford the interest payments that longer-term bonds would yield.

The yield on that 2020 bond, of course, rose to 5.338%, from 5.156%.
10.49am: My colleague Katie Allen has the full story on Britain's resurgent services sector, here.
10.26am: In the secondary bond market, Spanish bond yields keep rising. The yield on its 10-year bonds just rose above the 5.6% mark. This graph shows how they've been rising all morning, and accelerated in the last few minutes:
Spanish 10-year bond yields.
Timings in GMT. Photograph: Reuters
(with thanks to Yiannis Mouzakis, who has access to a more colourful Reuters terminal than I).
That's some way below the levels seen last autumn, when Spanish yields threatened to hit the 7% level. But the calm created by the €1trn of cheap loans offered by the European Central Bank may have worn off.
10.17am: The Spanish stock market has fallen to a four-month low, following this morning's disappointing bond auctions (see 9.49am for the details). Other European markets are also dropping.
Here's the latest:
Spain's IBEX has fallen by 0.8% to 7722, a four-month low.
The German DAX is down 1.64% at 6864.
The French CAC is down 1.3% at 3362
The FTSE 100 is down 1.1% at 5772.
Josh Raymond of City Index summed up the mood, saying:
The Spanish bond auction was fairly poor, with the indedbted country only able to sell €2.59bn when it had hoped to raise as much as €3.5bn, in the first real sign of confidence, or rather lack of, to the country's budget

9.58am: The cost of insuring Spanish debt against default has jumped following this morning's weak bond auction (see 9.49am).
According to Gavan Nolan of Markit, Spanish credit default swaps have hit their highest level since last November, dragging Italian CDS with them.
Live blog: news flash newsflash
9.49am: Breaking news – Spain's bond auction has gone badly.
The Spanish government sold much less than targeted – only managing to find buyers for €2.59bn worth of debt – well short of the maximum target of €3.5bn.
Spain was also forced to pay higher interest rates to sell the bonds on offer:
At the auction, the average yield on bonds maturing in 2020 rose to 5.338%, compared to 5.156% at the previous auction of its type. That means that investors demanded a higher rate of return for buying the debt.
The yield on bonds maturing in 2016 jumped to 4.319% (from 3.376%), while the yield on bonds maturing in 2015 rose to 2.89% (from 2.44%)
Not great news for the Madrid government. The euro crisis has just ratcheted up a notch....

and consider this piece as well regarding spain .....

Spanish Economic Drama: Nearly 57% of Budget Devoted to Pensions, Unemployment Benefits, and Interest; Unemployment Rate Hits 23.6%; Spain Warns of Soaring Debt

Inquiring minds keep poking around at problems in Spain and everywhere one looks problems are far greater than government officials would like you to believe.

Please consider this Google Translation from the Guru'sBlog Spanish Economic Drama, Over Half Federal Budget Devoted to Pensions, Unemployment and Interest
Today the Minister of Finance and Public Administration, Critobal Montoro, has submitted to Congress the 2012 State Budget , and I am frightened by the huge numbers that are involved in pensions, unemployment and interest.

37.1% of total state budget will be allocated to pension payments, 9.2 % for unemployment benefits , while another 10.5% will go to interest payments (28.848 million euros, equivalent to 2.7% of GDP.
In all, these three items account for 56.8% of total State Budget 2012.
Spain Warns of Soaring Debt 

The AP reports Spain Warns of Soaring Debt as Unemployment Rises
Spain said Tuesday its national debt will spiral sharply higher this year as data showed unemployment hit a record high in March, complicating efforts to stabilise the country's strained finances.

Budget Minister Cristobal Montoro said borrowings of 186.1 billion euros ($248 billion) this year will take the debt-to-GDP ratio to 79.8 percent from 68.5 percent in 2011, well above the EU 60 percent limit.

"Spain is a critical situation. That is what we're trying to address," he told a news conference after delivering the conservative government's cost-cutting budget for 2012 to parliament.

Adding to the strain on public finances, the number of people out of work rose for the eighth straight month in March as Spain headed back to recession with the economy expected to shrink 1.7 percent this year after expanding 0.7 percent in 2011.
The number of workers registered as without work climbed 0.82 percent from February to 4.75 million, the highest figure since the current statistics series began in 1996, the labour ministry said.

The 2012 budget -- approved by the cabinet on Friday -- includes 27 billion euros in tax increases and spending cuts aimed at slashing the annual public deficit to 5.3 percent of output this year from 8.5 percent last year.

It closes tax loopholes and rebates for large companies and freezes wages of public sector employees but spares jobless benefits and pensions amid growing public anger at the dire economic situation.
Spanish unemployment is up for the 8th consecutive month and may soon top 25%. Moreover, revenues will drop substantially.

There is no way Spain can meet its deficit targets.

In response, Brussels will soon be demanding cuts in pension benefits. More violence is right around the corner.

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