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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (87349)	2/21/2012 5:34:30 AM
From: Haim R. Branisteanu	Read Replies (1) \| Respond to of 219858

Italian Bond Yields At Lowest Since September After Greek Deal 21-Feb-2012 LONDON (Dow Jones)--Italian bond prices rose Tuesday, pulling yields down to their lowest levels since September 2011 after European leaders finally agreed a EUR130 billion bailout package for debt stricken Greece and averted a disorderly default, while Spanish bond prices also rallied. Markets had anticipated European leaders would sign off the aid package given that the consequences otherwise would have been catastrophic. There was thus a sense of relief that Greece will have funds in place to meet EUR14.4 billion of bond payments next month, although worries persisted over the ability of Greek policymakers to push through harsh austerity measures needed to plug gaping holes in the country's finances, with matters complicated by an election later this year. The bailout package for Greece involves a bigger loss for Greek bondholders and lower interest rates on funds given by international creditors, but Greece's debt as a share of its output is still forecast to be 120.5% in 2020. The debt to gross domestic product ratio could still be higher as severe belt tightening chokes growth. "Of course, the bigger picture remains unaffected--this being one where austerity denudes growth to such an extent that these news debt targets are missed by some considerable margin ensuring this proves to be the next rather than the last bailout and simply the first wave of restructuring," interest rate strategists at Rabobank said in a note. Still, bond markets cheered the latest developments. The 10-year Spanish bond yield fell by 8 basis points to 5.05% while the corresponding Italian bond yield was 11 basis points lower at 5.35%, according to Tradeweb. The iTraxx SovX Western Europe index is fractionally wider at 331/337 basis points having opened the day two basis points tighter, while the Europe index is one basis point tighter at 130/131 basis points and the Crossover index is seven basis points tighter at 562/565 basis points. "The markets are content that a deal has been reached and we won't have a default next month," a London-based bond trader said. Greece will start the debt swap offer with private bondholders in the coming days and there are doubts if participation will reach acceptable levels, particularly as investors are now expected to take a deeper loss on their holdings. That may force the Greek government to activate collective action clauses on Greek bonds to coerce investors, and this will probably trigger payouts of credit default swaps. The deal also risks undermining appetite for peripheral debt down the road as investors question the preferential treatment given to the European Central Bank. The ECB will not be bearing any losses on its Greek holdings and would instead transfer any profits it makes on its holdings. -By Neelabh Chaturvedi, Dow Jones Newswires; + 44 (0)207 842 9495, neelabh.chaturvedi@dowjones.com