The focus now is on whether the G20 meeting of finance ministers and central governors due from later today to tomorrow could agree on expanding the IMF funding, a safety net for the eurozone, to $500.0 billion,
Amid growing concerns over Spanish (debt) financing, the meeting failing to agree on enough expansion of the safety net would put a selling pressure on the euro, Spain’s Treasury sold EUR1.116 billion worth of two-year government bonds at an average yield of 3.463% earlier in the day, up sharply from 2.069% at a similar auction last month.
The country also sold EUR1.425 billion of ten-year debt at an average yield of 5.743%, up from 5.338% at a similar auction last month. It was the highest yield in five months.
Bond auctions have become key drivers of risk sentiment in recent months, as traders attempt to gauge the ability of indebted euro zone nations to fund themselves.
Spanish and French bond auctions went off without a hitch, or maybe with the help of the recent concessions built and while the euro seemed to record the highs of the day (~$1.3165) in response, the upticks were quickly sold into. There are several aspects of the auctions that are important for investors. It is not simply the amount that is being raised, but at what price and who is buying and with what enthusiasm.
Italy reported a dramatic drop in industrial orders, warning that the government's cut in its GDP forecast yesterday may be prove insufficient. Industrial orders fell 2.5% in February, which is more than twice the decline the market consensus expected. Adding insult to injury, the January drop was revised to -7.7% from -7.4%.
The recent IMF data that covers the period up through the end of Q3 '11 shows foreign investors reducing their share of Spanish bonds to 38% from a little over 50% in 2009 (and the foreign share of Italian debt has fallen from 42% to 37% in the same period).
Sweden, Norway, Denmark and Poland are among the nations that have since pledged billions of dollars to the effort, but it was unclear what figure would be settled on at the meeting.
Japan reported a smaller than expected trade deficit in March (JPY82.6 bln vs JPY120 bln expectations). Exports rose 1.2% in the month and 5.9% on a year-over-year basis. Imports rose 10.5% year-over-year after a 9.2% increase in Feb. What really stands out of the Japanese exports are to the US where they are up almost 24% on a year-over-year basis. While there is the base effect from last year, but there is also the growth differentials that warn of further deterioration of the US trade balance.
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