By Nick Cawley
London--Peripheral government bond yields stayed at elevated levels Wednesday as markets remained on-edge ahead of the European Union Summit and, more immediately, Wednesday's treasury-bill sale from Italy.
Italy's auction of euro nine billion ($11.25 billion) of six-month t-bills at 0900 GMT many be seen as a litmus test for Thursday's five- and 10-year BTP auctions. Although this t-bill sale should be supported by ongoing domestic demand, lacklustre interest at Tuesday's Spanish t-bill sale and for the combined CTZ/BTPei sale from Italy, has heightened interest in this sale.
"Wednesday's auctions will capture more attention than usual given the market's negative reaction to the high yields registered at yesterday's CTZ/BTP€i taps," analysts at WestLB said in a note to customers.
At 0745 GMT, the yield on Spain's 10-year government bond was two basis points lower at 6.79% while Italy's 10-year was quoted three basis points lower at 6.12%, according to data from Tradeweb.
Meanwhile, market attention is increasingly focusing on the European Union leaders summit in Brussels on Thursday and Friday, but many market participants aren't expecting any new policies to emerge from the meeting on fighting the euro-zone debt crisis.
"The EMU debt crisis is and remains the dominant issue in the financial markets and the European Union summit that is looming harbors an increasing event risk" said analysts at Helaba. "In the meantime, most market players assume that no far-reaching resolutions will be passed that would be capable of containing the crisis as the differences of opinion are too big," they added.
Write to Nick Cawley at nick.cawley@dowjones.com
(END) Dow Jones Newswires
June 27, 2012 04:35 ET (08:35 GMT)
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