By Simon Miller
Italy and Spain cleared important debt sales this morning (12.01.2012) with better than expected results.
Prior to the sales, there were fears that both countries would fail to meet their targets as turmoil still grips the eurozone over liquidity and debt issues.
Spain doubled its original target and raised €9.986bn (£8.246bn) of notes including a new three-year benchmark which raised €4.27bn billion at an average yield of 3.384 percent, down from 5.187 percent at the previous auction of similar-dated securities on 1 December.
Meanwhile, Italy sold €8.5bn of one-year bills at 2.735% compared with 5.952% on 12 December. It also sold 136-day bills and €3.5bn of debt maturing at the end of May.
Ranvir Singh, CEO at market analysts, RANsquawk, noted: “"Spain sold twice the level of bonds that it was planning to, which was highly impressive and shows there is still some appetite for peripheral eurozone nations. But let's not get carried away. To some extent, the sale was exaggerated by the lack of liquidity in the market and also the recent European Central Bank announcement of two three-year long-term refinancing operations, which has lifted investors.”
Singh added: “The eurozone is still in a dire position, both politically and economically, and so this sale may well be a short-term blip.”
Meanwhile, a leading German politican has broken Chancelor Angela Merkel's stance of unity within the eurozone by warning that Greece will inevitably leave the currency.
With Greece facing tense talks over potential haircuts with its private debt holders, the deputy floor leader of Germany's Christian Democratic Union Michael Fuchs said a Greek exit was simply a matter of mathematics.
He added: " The problem is not whether they are capable of paying their loans - they will not, not at all, never."