I’m not a great fan of City of London colloquialisms, but one term is sticking in my mind today.It’s how traders and analysts etc. around here, informally refer to the success of a corporation or a state, in bond offerings.[Some of you will know where I’m going with this now, but humour me please.]
They say, if a bond offering is deemed to have gone well that Such-and-Such Corporation or government, has ‘got away’ the offering well.The phrase fits a second set of much-watched bond offerings in the euro zone today – after Portugal’s yesterday – very well. But it also makes me think of a similar phrase, ‘to get away with’ something, thinking about both Italy and Spain, which sold bonds today and the euro zone too.
As with Portugal yesterday, there’s no doubt today’s European bond auctions should be deemed successful. Italy ‘got away’ EUR3B in BTP Nov15 and EUR3B BTP Mar26 and EUR6B, which puts the result at the top end of the planned range.                                             Demand was stronger than at a similar sale in November. The 5-year paper attracted 1.41x bid-to-cover and the 15-year 1.42x.
Once again, however, we need to note the gains in interest rates, with yields at 3.67% for 5-year and 5.06% for 15-year. 40 basis points and 25bp increases compared with November, respectively.
Still, Spain also, ‘got away’ the maximum amount it planned – EUR2-3B.  Again demand strengthened compared with the November auction, with Spain registering a 2.1x bid-to-cover vs. 1.6x in November.But yes, the market demanded more in terms of risk premia from Spain too: 4.54% in yield, almost 100bp more than November.
Predictably, the euro has rallied more today, following these prima facie successful auctions,  with EUR/USD having broke back above the psychological 1.30 mark earlier this week, it added the best part of another 3 euro cents from late morning to late afternoon [piercing the 50-day moving average on the 6-month chart, by the way.]
In terms of trading, it’s logical to expect that there could have been triggers [stops] around these levels, which could take us back up to near where a reasonable gap was opened on November 22nd around 1.36, but with concomitant downside risks too.
Like the the euro, Spain, Portugal and Italy, have got away with it too – but with an inevitable ‘for now’, also.
There is the matter of the rather unreal-looking funding costs demanded from the states offering  bonds this week. Yields can hardly be considered normative, given that the European Central Bank is very likely to have been helping to mop up liquidity at these auctions, not to mention the on-the-record contributions from China and Japan.And like the euro, the euro zone faces some more near-term challenges before we can speak of the crisis being over.Next week, Portugal and Spain will hold T-bill auctions and Spain will sell SPGB Oct20. Plus Spain has announced that it will sell a new 10-year bond via syndication over the next few weeks.Ideally these need to go well and yields need to start retreating before the risk of another bailout from the EFSF can be ruled out.Headlines indicating early-stage talks to expand the euro zone’s emergency funding facility might just represent moves to ensure sensible insurance is in place. But they also of course implicitly raise the perceived risks.
ThSM