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France France’s Borrowing Costs Rise at Bond Sale (karma: 3)
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By TexanForever  Comments: 19116, member since Thu Jun 10, 2004On Thu Jan 05, 2012 09:59 AM
AAA downgrade on the way. 
.
France’s Borrowing Costs Rise at Bond Sale
By Mark Deen and Paul Dobson - Jan 5, 2012 7:52 AM CT
Spain changed the securities it planned to sell at the auction, opting for longer-dated notes that already trade instead of a new benchmark three-year bond, citing market conditions.
France sold 7.96 billion euros ($10.2 billion) of debt, with 10-year borrowing costs rising in the country’s first bond auction of the year as credit-rating companies threaten to cut the nation’s AAA grade.
The government sold 4.02 billion euros of the bonds maturing in October 2021 at an average yield of 3.29 percent, from 3.18 percent on Dec. 1. The euro fell to its weakest level against the dollar in 15 months, and the extra yield investors demand to hold French 10-year bonds instead of benchmark German bunds widened to the most in about six weeks.
“There’s still the threat of a downgrade hanging over France and until we get that situation cleared up you can’t signal the all-clear,” said Eric Wand, a fixed-income strategist at Lloyds Bank Corporate Markets in London.
France has the biggest debt burden of the six top-rated euro nations, at 85 percent of gross domestic product. Its 10- year yield spread to German debt widened to a 21-year high of 204 basis points on Nov. 17 amid concern Europe will struggle to contain the region’s debt crisis. Today, it reached 151 basis points, or 1.51 percentage points, the most since Nov. 25. It was at 144 basis points at 2:30 p.m. Paris time compared with a premium of 44 basis points for AAA rated Finland and 37 basis points for the Netherlands.
The 17-nation common currency fell as much as 1.1 percent to $1.2803 as the region’s rescue fund boosted the extra yield it offers over the benchmark rate to sell three-year notes.
Other Sales
Hungary, meanwhile, raised less than planned at a Treasury bill auction, pushing the forint to a record low. European stocks fell for a second day as UniCredit SpA led banks lower on concern more lenders may be forced to raise capital.
France, which also auctioned 2023, 2035 and 2041 securities, had aimed to sell a maximum of 8 billion euros. The bid-to-cover ratio, or the number of bids for each unit of debt sold, for the 10-year-bond fell to 1.64 from 3.05 on Dec. 1. The nation drew bids for 1.82 times the 2.17 billion euros of 2041 bonds sold, and had bid-to-cover ratios of 3.22 and 2.02 for the 2023 and 2035 securities respectively.
“This is proving to the market again that they can still raise finance without too many difficulties,” said Wand.
The French sale came a day after Germany sold 4.1 billion euros of bonds, getting more bids than its maximum target of 5 billion euros. The rush for funding may determine whether euro- area leaders can save the 13-year-old single currency. Italy and Spain are among countries that in the coming weeks will sell debt that may reach 262 billion euros in the first quarter, according to Deutsche Bank AG forecasts.
Sarkozy Efforts
“It’s the first French auction of the year and it has broadly gone as expected,” said Peter Goves, a fixed-income strategist at Citigroup Inc. in London. “Where France is trading, a lot of negatives are in the price, especially downgrade concerns. Spanish and Italian sales will be more of a litmus test for the market.”
Today’s sale by the French debt-management body, Agence France Tresor, comes as President Nicolas Sarkozy -- who faces re-election in about four months -- seeks to protect France’s creditworthiness with tax increases and spending cuts.
France has also shrunk its 2012 bond-sale plan, with AFT saying last month it needs 177.9 billion euros in financing this year, down from the 182 billion euros estimated on Sept. 28.
French 10-year bonds fell for a seventh-straight day today, with the yield climbing as high as 3.38 percent, the most since Dec. 9. It reached a high last year of 3.82 percent on Nov. 17 and fell to a low of 2.44 percent on Sept. 12.
Low Cost
The average financing costs of medium and long-term French debt remains low. Last year, it was 2.8 percent, the second- lowest since the creation of the euro, after the 2.53 percent in 2010, according to AFT. The bid-to-cover ratio at auctions last year was 2.4, up from 2.1 in 2010.
Ratings companies Standard & Poor’s and Moody’s Investors Service are reviewing the sovereign credit grade of Europe’s second-largest economy, while Fitch Ratings cut France’s credit outlook on Dec. 16 on the “heightened risk of contingent liabilities” from the euro-region crisis.
S&P placed the ratings of 15 euro nations, including AAA rated Germany and France, on review for possible downgrades on Dec. 5, saying it may cut the French grade by as many as two steps. Moody’s said Dec. 12 it will review the ratings of all EU countries after a summit on Dec. 9 in Brussels failed to produce “decisive policy measures” to end the region’s debt turmoil.
Slowing Economy
Euro-area leaders are struggling to solve the region’s sovereign debt crisis that is now in its third year. The push continues with a Jan. 9 meeting between Sarkozy and German Chancellor Angela Merkel in Berlin. Euro area finance chiefs convene in Brussels on Jan. 23, with government leaders gathering a week later.
France’s woes, like those of other euro-area countries, are compounded by an economy that’s edging toward recession as budget cuts to contain the fiscal crisis bite.
The French economy is probably already in a recession that will last through March, national statistics office Insee said last month. The European Commission reduced the region’s 2012 growth forecast by more than half to 0.5 percent in November. The euro has for the first time in a decade recorded two consecutive annual losses against the dollar.
After Italy, it has the most amount of debt coming due this year in Europe at $367 billion, followed by Germany at $285 billion, according to data compiled by Bloomberg.
Government Borrowings
Governments of the world’s leading economies have more than $7.6 trillion of debt maturing this year, with most facing a rise in borrowing costs.
Led by Japan’s $3 trillion and the U.S.’s $2.8 trillion, the amount coming due for the Group of Seven nations and Brazil, Russia, India and China is up from $7.4 trillion at this time last year, according to the data.
France’s financial institutions also have the largest debt holdings in the five crisis-hit countries -- Greece, Portugal, Ireland, Italy and Spain -- at $681 billion as of June, according to data from the Bank for International Settlements in Basel, Switzerland.
European banks have about $665 billion of debt coming due in the first six months, according to Citigroup Inc., based on Dealogic data.
To contact the reporters on this story: Mark Deen in Paris at markdeen@bloomberg.net; Paul Dobson in London at pdobson2@bloomberg.net
To contact the editors responsible for this story: Vidya Root at vroot@bloomberg.net Daniel Tilles at dtilles@bloomberg.net
www.bloomberg.com . . .
. 9 Replies to France’s Borrowing Costs Rise at Bond Sale |  re: France’s Borrowing Costs Rise at Bond Sale (karma: 1)
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By NikosAliagas  Comments: 1027, member since Sun Jul 15, 2007On Thu Jan 05, 2012 12:38 PM
ROLFMAO.
Not surprisingly, Reuters has more positive comments than Bloomberg. These guys know their stuff.
France sold 7.96 billion euros ($10.3 billion) of 10- to 30-year bonds at the auction, at the top of its projected range, after receiving total bids for nearly 15 billion euros.
The 10-year spread over Bunds was a whisker higher after the auction at 143 basis points, remaining well below its euro-era high of more than 200 basis points reached in November.
"Overall it's a pretty solid auction," Michael Leister, strategist at DZ Bank in Frankfurt. "It should be enough to dispel concerns with regards to France's funding capacity for the time being."
www.reuters.com . . . |  re: France’s Borrowing Costs Rise at Bond Sale (karma: 1)
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By BurnParis Comments: 27049, member since Thu Mar 13, 2003On Thu Jan 05, 2012 01:21 PM
Edited by BurnParis (59538) on 2012-01-05 13:23:05
NikosAliagas wrote:
ROLFMAO.
Not surprisingly, Reuters has more positive comments than Bloomberg. These guys know their stuff.
Yeah,.. I see what you mean - I believe Reuters too!
From the same article;
www.reuters.com . . .
AAA HANGING BY A THREAD
France's top-notch credit rating is hanging by a thread due to its slowing economy, high structural deficit and banking exposure to the euro zone's most troubled debtor states.
Last month, Fitch put France's rating on a negative outlook and Standard and Poor's, which placed 15 euro zone countries under review, singled out France as the only AAA country facing a possible two-notch downgrade.
With its economy expected to enter recession in the first quarter of this year, France will need more painful austerity measures to reach a deficit target of 4.5 percent of gross domestic product this year, though the impending election may complicate that.
Adding to investors' concerns, Socialist election frontrunner Francois Hollande -- who leads Sarkozy by a wide margin in polls -- has pledged to renegotiate a fiscal compact being agreed by the European Union, potentially complicating efforts to solve the debt crisis. ($1 = 0.7747 euros) |  re: France’s Borrowing Costs Rise at Bond Sale (karma: 1)
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By simplefrench Comments: 63902, member since Wed Mar 19, 2003On Thu Jan 05, 2012 03:09 PM
5 January 2012, still no downgrade. | |
 re: France’s Borrowing Costs Rise at Bond Sale en>fr fr>en
By GhostDivision Comments: 3458, member since Thu Feb 09, 2006On Thu Jan 05, 2012 04:11 PM
Yeah, yeah- but-
- What are auto insurance rates looking like this year? 
simplefrench wrote:
5 January 2012, still no downgrade. |  re: France’s Borrowing Costs Rise at Bond Sale en>fr fr>en
By BrasherBoot Comments: 7356, member since Thu Jul 14, 2005On Thu Jan 05, 2012 04:26 PM
I like my AAA do you like your AAA?
Er.... Hello..? Anyone left..? | re: France’s Borrowing Costs Rise at Bond Sale (karma: 1)
en>fr fr>en
By NikosAliagas Comments: 1027, member since Sun Jul 15, 2007On Thu Jan 05, 2012 04:29 PM
GhostDivision wrote:
Yeah, yeah- but-
- What are auto insurance rates looking like this year?
Holy Cow, the GEICO Lizard has just written an ff.com post !
 | re: France’s Borrowing Costs Rise at Bond Sale (karma: 1)
en>fr fr>en
By NikosAliagas Comments: 1027, member since Sun Jul 15, 2007On Thu Jan 05, 2012 05:15 PM
simplefrench wrote:
5 6 January 2012, still no downgrade.
FYP |  re: France’s Borrowing Costs Rise at Bond Sale (karma: 1)
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By FrogFryer Comments: 36121, member since Wed Apr 16, 2003On Thu Jan 05, 2012 05:33 PM
NikosAliagas wrote:
simplefrench wrote:
5 6 January 2012, still no downgrade.
FYP
I wouldnt want to rush it if I was in some minor league country in europe | re: France’s Borrowing Costs Rise at Bond Sale en>fr fr>en
By GhostDivision Comments: 3458, member since Thu Feb 09, 2006On Sat Jan 07, 2012 06:01 AM
They'd be little league/Dizzy Dean if they were a ball team.
But the big question between Simpleton and Niko_The_Wog is; who is the pitcher and who is the catcher?
FrogFryer wrote:
NikosAliagas wrote:
simplefrench wrote:
5 6 January 2012, still no downgrade.
FYP
I wouldnt want to rush it if I was in some minor league country in europe |
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