Italy Foreign Exchange Bond Auctions

Published on August 31, 2011 by admin · No Comments

Foreign Exchange Overnight/Morning Ranges:

Currency Rates EUR/USD 1.4416-1.4453

Currency Rates GBP/USD 1.6290-1.6329

Currency Rates GBP/EUR 1.1288-1.1310

Italian bond auctions did not go to plan causing Europe’s debt to sink further due to Italy only managed to sell EUR 7.74 bn in 3,75 and 10 yr debt. Italy’s target was 8bn euros however the 3.75 bn euros over a 10 year issue drew a lower bid cover ratio of only 1.27 vs. 1.38.

So less people were demanding Italian debt. Now while the yield also slipped from 5.77% at the previous issuance to 5.22% this was actually above the market rate at the time of 5.05% and therefore cannot really be counted as a strong backing of Italian debt. I expect we will see further ECB buying of Italian and Spanish debt ahead of a big Spanish auction tomorrow.

Little change overnight in major currencies, despite consumer confidence in the U.S. plunging to its lowest level in two years. Stocks managed to hold onto their recent gains after the Federal Reserve minutes were released and showed that some members favoured `a more substantial move’ beyond the pledge previously adopted by the panel to hold rates at record lows for the next two years.

Anticipation of a further stimulus by the Fed at the September meeting is now expected should data prove to be downbeat over the next few weeks. The German cabinet is expected to approve today changes to the bail-out fund (EFSF), which they are hopeful of being passed by parliament on the 29^th September.

Commodity based currencies hold onto their gains and Sterling is relatively unchanged, little on UK data this week and hovering around the $ 1.6300 pivotal level.

EUR/USD currently 1.4441. Support 1.4200, resistance 1.4500.

GBP/USD currently 1.6305. Support 1.6300, resistance 1.6600.

GBP/EUR currently 1.1291. Support 1.1100, resistance 1.1350.

Oil $ 88.82 Gold $ 1836

Dow +0.18% FTSE -0.01% Nikkei +0.01%