Aang Sunu

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Euro Climbs as Spanish Bank Fears Put to Rest by Yet Another Successful Debt Auction

Posted by aangsunu on 16 July 2010

source : dailyfx

If we were to judge the euro’s strength on its performance against the US dollar alone, we wouldn’t see the full picture. Starting from a severely depressed level set last month; a retracement isn’t difficult to support as the market unwinds some of the risk premium priced in under the probability of an imminent financial crisis for the Euro-area. That being said, the shared currency actually rallied across the board Thursday – with a strong performance against high-yield, fundamental sound and safe havens alike. This is the sign of true strength. The means for such strength: the success of another governmental debt auction. So far this week, Germany, Italy, Portugal and Greece have tapped the capital markets to raise money to support their normal financing needs. Added to this list today was Spain, which auctioned off 3 billion euros worth of 15 year notes to a bid that was 2.57 times what was offered. This is impressive considered just yesterday the Bank of Spain reported national banks have been essentially locked out of the capital market. With Greece, Portugal and Spain stepping back into the market, conditions seem to be normalizing. That may be pushing it though. The rates they are paying are still overwhelming and growth is naturally deteriorating


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