Bonds: Reports of Spanish bailout talks comfort markets
Posted on: 21 Sep 2012 by Max Black

These were the yields and basis point movements of some of the most watched 10-year bonds by the close in Europe:

Spain: 5.76% (+1bp)
Italy: 5.05% (+7bp)
France: 2.27% (n/c)
Japan: 0.80% (n/c)
Germany: 1.60% (+2bp)
UK: 1.83% (+3bp)
US: 1.77% (+1bp)

There are 100 basis points to a percentage point.

The focus was on Spain today, with rumours swirling about behind the scenes negotiations relating to a bailout request.

The Spanish government insists that it will not freeze pension plans, contradicting earlier reports from Reuters.

When asked whether the Spanish government is studying a freeze on pension plans, deputy Prime Minister Soraya Saenz de Santamaria answered that the country’s finance ministry has categorically denied that option. She pointed out that the President said that pensions would be the last thing he would touch.

A government official said that the possibility is not even being studied, according to Spanish daily Expansion. On Friday morning, European Commission Vice President Joaquin Almunia said that he has no record of that possibility being considered.

Investors generally shunned bonds, however, so apparently it was enough to know that something is going on behind closed doors with the European Union said to be in talks with Spain over the terms for a bailout although Spain’s President Mariano Rajoy is reluctant to request assistance due to the conditions that would likely be attached.

Meanwhile, the Italian Vice-Finance Minister, Gianfranco Polillo told the Bloomberg news agency that Spain and Italy will not request a bailout unless financing costs take off again. No government would voluntarily accept the conditions attached to a bailout programme, said Polillo, adding that a request would only be placed once their backs are against the wall.

One item for the topical pub quiz nights over the week-end: the yield on 10-year Green bonds fell below 20% for the first time since March 29th.

JH

Tags: 10 year bonds | 100 basis points | basis point | bloomberg news | de santamaria | deputy prime minister | finance minister | finance ministry | saenz | soraya