Spain is not Italy. The euro-zone’s fourth largest economy enjoyed another successful bond auction, raising around double the expected amount. This time it auctioned bonds for longer terms, and also saw significant falls in its yields, compared to previous auctions.Â
This success has an impact on the secondary market: the benchmark 10 year bond yields are falling. It also helps EUR/USD stabilize in range, under 1.30.
Earlier this week, it sold short term bonds at lower yields than previous auctions. On the other hand, Italy had a poor bond auction.
Spain sold a total of 6 billion euros, while it planned to sell only 2.5 to 3.5 billion. This alone is a great success. Yields were good as well.
It sold bonds maturing in January 2016 at a yield of only 3.15%, much lower than 4% seen last time. For bonds maturing in March 2020, it got a yield of only 4%, compared with 5.24% beforehand.
Only the longest maturity, April 2021, got a yield of 5.55%, almost identical to the previous auction and similar to the yields in the secondary market.
Spanish 10 year yields are falling today to 5.54%. This is still high and above the levels seen throughout most of the year, but a huge distance from the distressed Italian yields, currently at 6.81%.
EUR/USD is stabilizing at 1.2977, in the narrow range seen after the downfall. Earlier it managed to temporarily regain the 1.30 line, but the disappointment from the lack of Swiss moves sent it lower once again.
The low of 1.2945 serves as support, before more support at 1.2920, and very strong support at 1.2873 – the year to date low.
For more on the euro, see the euro/dollar forecast.
