Italy Bonds Rise as Borrowing Cost Falls at Auction; Stocks, Futures Gain

By Michael Shanahan - Dec 28, 2011 7:45 PM GMT+0700

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Dec. 28 (Bloomberg) -- Steve Bernstein, an advisor with Primus Capital, talks about the outlook for Asian markets in 2012, the European debt crisis and his investment strategy. Bernstein spoke with Rishaad Salamat, John Dawson, Mia Saini and David Ingles in Hong Kong on Dec. 23 on Bloomberg Television's "Asia Edge." (Source: Bloomberg)

Italian 10-year bonds rose for the first time in five days as the nation’s borrowing costs plunged at an auction of 9 billion euros ($11.8 billion) of debt. European stocks and U.S. equity index (MXAP) futures advanced.

The rate on 10-year Italian bonds fell 14 basis points to 6.85 percent after losing as much as 25 points. Similar- maturity Spanish yields dropped 24 basis points to 5.10 percent. The yen climbed against 11 of its 16 most-active peers and advanced 0.3 percent versus the euro at 7:43 a.m. in New York. The Stoxx Europe 600 Index climbed 0.5 percent and Standard & Poor’s 500 Index futures added 0.3 percent. Gold for immediate delivery fell for a second day.

Italy sold the 179-day bills at a rate of 3.251 percent, down from 6.504 percent at the last auction on Nov. 25. Demand was 1.7 times the amount offered, compared with 1.47 times last month. Economic reports showed Japan’s industrial output dropped and confidence among South Korean manufacturers sank to a 30- month low. The U.K. faces the “toughest” employment market in two decades, the Chartered Institute of Personnel and Development said.

“Italy was able to halve the rates from the previous auction,” said David Schnautz, a fixed-income strategist at Commerzbank AG in London. “The next stop is tomorrow’s bond auction and today’s result is a good omen for that. It should be comforting for the market.”

Italy will seek to sell bonds maturing in 2014, 2018, 2021 and 2022 tomorrow. The nation’s 10-year bond yields climbed to 7 percent yesterday, the level that spurred Greece, Ireland and Portugal to seek bailouts. A report tomorrow may show Italian business confidence dipped to the lowest in almost two years.

Financial Markets

The S&P 500 was poised to rally for a sixth straight day, its longest streak in more than a year. The FTSE 100 Index rose 0.7 percent in the U.K., where financial markets were shut the previous two days for holidays. Germany’s DAX Index rose 0.1 percent.

The Stoxx 600 has dropped 12 percent this year, compared with an 18 percent slump in the MSCI Asia-Pacific Index and a 0.6 percent gain in the S&P 500. The MSCI Asia-Pacific retreated 0.5 percent today.

Japan’s industrial output slumped 2.6 percent in November from October, more than all the forecasts in a Bloomberg survey of 29 economists. The Bank of Korea said an index (MXEF) of manufacturers’ expectations for January was 79, the lowest since July 2009. Thailand’s industrial output sank the most in more than a decade in November, government data showed.

Treasury 10-year yields were little changed at 2 percent, while German bunds declined, pushing the 10-year yield two basis points higher to 1.94 percent. German debt has returned 9.3 percent this year, the most since 2008, according to indexes compiled by the European Federation of Financial Analysts Societies and Bloomberg. Italian debt lost 6.1 percent, while Treasuries made a profit of 9.2 percent, the indexes show.

Global Growth

Gold for immediate delivery was down 0.4 percent at $1,586.79 an ounce, the lowest since Dec. 16. Oil in New York dropped 0.6 percent to $100.78 a barrel, the first decline in seven sessions. Cotton jumped 2.2 percent to 89.84 cents a pound.

Oil earlier traded near the highest level in six weeks after Iran threatened to block the Strait of Hormuz, increasing concern that global supplies will be curbed. Futures have climbed 11 percent this year.

The S&P 500 was little changed yesterday following last week’s 3.7 percent rally. The Conference Board’s index of consumer confidence rose to 64.5, exceeding all estimates in a Bloomberg survey and reaching the highest reading since April, figures from the New York-based private research group showed yesterday.

The MSCI Emerging Markets Index dropped 0.5 percent, heading for its biggest decline in a week. South Korea’s Kospi index fell 0.9 percent, down for a third day. India’s Sensex (SENSEX) decreased 0.9 percent before a report this week that may show the nation’s current-account deficit widened to a record. Hungary’s BUX Index retreated 1.1 percent, Poland’s WIG20 decreased 0.6 percent and Turkey’s ISE National 100 Index slipped 0.2 percent.

To contact the reporter on this story: Michael Shanahan in London at mshanahan3@bloomberg.net

To contact the editor responsible for this story: Michael P. Regan at mregan12@bloomberg.net