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News : International Last Updated: Apr 16, 2012 - 4:42 PM


Markets: German 10-year bund yield at new record low; Spanish 10-year bond yields at highest since December
By Finfacts Team
Apr 16, 2012 - 9:38 AM

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The yield on the benchmark 10-year German bund dropped to another record low Monday and Spanish yields rose (yield rises inversely in relation to price) above the 6% level.

The 10-year German bund yield fell to a low of 1.632%, according to Tradeweb. The corresponding Spanish bond yield rose above 6% for the first time since December, climbing 12 basis points to 6.06%.

Spain is due to sell  bonds at an auction on Thursday.

Economic View: Domestic sovereign holdings continue to rise; Dermot O'Leary, chief economist at Goodbody, comments  - - "New figures published by the Central Bank on Friday show that domestic financial institutions increased their exposure to Irish long-term debt over recent months. Of the €85bn in outstanding Irish long-term debt at the end of February, €20bn (23%) was owned by the resident sector. Within this, the largest amount (€17bn) was held by resident Monetary Financial Institutions (MFI) and the Central Bank. From a separate Central Bank release, we knew already that the covered banks (AIB, Bank of Ireland, Irish Life and Permanent and IBRC) owned €13.7bn (16%) in Irish bonds at the end of February, while all resident MFIs owned €14.7bn. By implication, the Irish Central Bank owns €2bn in Irish long-term debt.

The 16% ownership by the covered banks compares with 13% three months previously, while in February 2011, the holdings by the domestic covered banks was 11%. This is now the highest share since January 2003. Although we don’t have official information on the ECB holdings of Irish debt by way of the Securities Markets Programme, we have been assuming a figure of €15bn. This would leave the foreign “free-float” of Irish debt at c.€50bn. Higher holdings of domestic debt is not something that is exclusive to Ireland, with domestic purchases increasing in many euro area countries over recent months, especially following the LTRO exercise.

These data do not include the effects of LTRO II, so one would expect the domestic holdings to have increased further in March. The stigma of domestic sovereign exposure has reduced since the introduction of LTRO and encouragement by European officials. However, the increased holdings do help to explain, somewhat, the good performance of Irish sovereign bonds over recent months.
William Hill; Press reports on delay in US acquisition process

According to reports this morning (The Guardian), William Hill’s move into the US sports betting market has stalled. In order for William Hill to complete the acquisition of the three sports betting suppliers it announced last year, American Wagering, Brandywine and Cal Neva Sports book, it had to receive regulatory approval from the Nevada Gaming Control Board and the Gaming Commission. The press reports stated that the William Hill application had not been included in the May agenda of the Gaming Control Board. This morning’s reports note that applications from international companies can take two years or more.

Overall, our William Hill forecasts do not include these bolt-on deals as we await regulatory approval and we would note that at this stage the merits of the deals are more strategic than financial. We would also add that while any delay in the process is unwelcome, given the thorough and onerous nature of the Nevada approval process, such delays should not come as a major surprise."

EU seeks to bolster IMF lending capacity: Conall Mac Coille, chief economist at Davy, comments  -- "The key topic at this week's IMF spring meetings is whether the United States and emerging economies are willing to agree to an expansion in the IMF's lending capacity against the backdrop of renewed pressures in European bond markets. Many countries had indicated the onus was on European members to boost the lending capacity of the European Stability Mechanism (ESM) fund prior to any IMF agreement.

Hence, markets may speculate this week if the recent EU agreement to bolster ESM funding to €500m, in addition to €300m of committed lending capacity, has been sufficient to persuade non-European countries to commit more funds to the IMF's lending capacity.

Although the combined power of the European funds now exceeds the symbolic $1trn mark, they fall short of the €1trn of lending capacity that had been mooted by the EU Commission amongst others. So shortcomings in Europe's response to the debt crisis may still hinder efforts to expand the IMF's lending capacity.

Indeed, last week, executive board member Benoit Coeure had hinted that the ECB may still utilise its Securities Markets Programme to ease pressures in European bond markets. But any optimism for a sharp response from the ECB was blunted by comments from Klass Knot, who indicated that the ECB is very far from reactivating its bond buying programme. In addition, Bundesbank opposition to the range of emergency measures to fight the European debt crisis has been evident for some time. So uncertainty about the ECB's role in the sovereign debt crisis may also be a counter-productive issue at this week's IMF spring meetings."

Asia Markets

The MSCI Asia Pacific Index fell 0.9% Monday. The measure increased 11% in the first quarter.

Japan's Nikkei dipped 1.74%; China’s Shanghai Composite Index declined 0.09%. South Korea's Kospi index slid 0.87%. Australia's S&P/ASX 200 slipped 0.49% and the Bombay Stock Exchange Sensex 30 index in Mumbai climbed 0.33%.

Asia benchmarks

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is down 0.52% in early trading Monday.

The ISEQ has dipped 0.13% in Dublin.

Elan is down 0.76%.

European Benchmarks

Irish Share Prices

Key Index Performance Statistics

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Currencies

The euro is trading at $1.3016 and at £0.8221.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

On Thursday, July 15, 2010, the index fell for the 35th straight session, by 9 points, or 0.537%, to 1,700 points, Bloomberg report.

On Friday last, the BDI closed up 12 points or 1.25% at 972 - -  the BDI plunged a full 70% from its recent mid-October peak of 2,173 to an all-time low of 647 on February 3. London's Baltic Exchange was closed on Friday and Monday.

Freighter Oversupply Weighs on Shipowners and Banks - - Jan 26, 2012: The New York Times says vessels bought during the global commodity boom are only now being delivered, putting pressure on the European banks that financed the purchases.

The skyscrapers and immaculate beaches of Singapore's seaport look out on one of the world’s largest parking lots: mile after mile of empty cargo ships, as far as the eye can see.

Similar fleets bob at anchor, with empty cargo holds, off the coasts of southeast Malaysia and Hong Kong. And dozens of newly built ships float empty near the giant shipyards of South Korea and China, their owners from all over the world reluctant to accept delivery during one of the worst markets ever for the global shipping industry.

As recently as six weeks ago large freighters that can carry bulk commodities like iron ore or grain were fetching charter rates of $15,000 a day. Now, brokers and owners say, the going rate is $6,000 a day. If any customers can even be found.

Crude oil for April 2012 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $102.14 down 69 cents from Friday's close. In London, Brent for April delivery is trading on the International Commodities Exchange at $119.90. The North Sea benchmark accounts for two-thirds of the global market.

The margin between the US benchmark WTI (West Texas Intermediate) used on the New York Mercantile Exchange and Brent is over $17 - - The Globe and Mail says that for the past 10 months, Canadian producers - - whose prices are tied to WTI - - have been taking steep discounts for their oil compared with international crude prices that are benchmarked against North Sea Brent, which can be shipped more readily. In the past, WTI tended to trade at a small premium to Brent, because it is easier to refine.

That spread hit a peak of $28.08 (US) on Oct. 14, but has fallen dramatically since then. After plans for more pipeline capacity at Cushing, Oklahoma, the differential narrowed.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,645.10, down $13.40 from Friday's close in New York.

Gold had hit a record high of $1,921.05 a troy ounce on Sept 6.

Check out our new subscription service, Finfacts Premium , at a low annual charge of €25 - - if you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to support the service.

It's a simple fact that in the prevailing economic climate, the provision of high quality content cannot be sustained through advertising alone. 

Business executives who put a premium on time and value high quality information, should use our service.

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