1:30 PM Frankfurt European markets sharpened focus on Spain as the country battles worsening fiscal conditions. Spain raised 2.2 billion and France sold 8.43 billion of debt in an auction today at diverging borrowing costs. Manufacturing sector activity was mixed in the euro area.
European markets edged lower on the worsening fiscal situation in Spain fueling speculation that the country may be forced to seek a bailout from international lenders sooner than expected. Spain is also expected to release the state of its banks today.
However, Spain managed to raise 2.2 billion in a bond auction at higher yields, whereas France sold 8.43 billion of debt at lower borrowing costs today.
In early trading, investors were cautious after weak global manufacturing data and no announcements of additional stimulus measures from the Fed.
Antonis Samaras, leader of the conservative New Democracy party was sworn in as Greece''s new Prime Minister on Wednesday and will lead a coalition government of three parties.
The conservative pro-bailout New Democracy party that won 29.7% of the votes or 129 seats in Sunday''s polls are the senior partners in a coalition with the socialist Pasok party and the smaller Democratic Left party.
All three parties back Greeces pledges to the austerity measures laid as a precondition for financial aid packages from the troika but are determined to renegotiate soften harsher terms on minimum wages and the debt repayment schedule.
In Paris trading, the CAC-40 Index declined 10.32 or 0.3% to 3,116.20 and in Frankfurt the DAX Index edged lower 22.30 or 0.4% to 6,369.70.
The yield on Spains benchmark 10-year bonds declined 11 basis points to 6.60% and Italian 10-year yields fell five basis points to 5.71%.
Spanish Bond Auction
The Spanish Treasury sold 2.2 billion or $2.8 billion of bonds maturing in 2014, 2015 and 2017 at higher yields.
The Treasury sold 700 million of the April 2014 bond at an average yield of 4.706% compared to 2.069% at the last auction of held in March.
Spain sold 918 million of the bond due in July 2015 at an average yield of 5.457% compared to 4.876% at the prior auction in May.
Also, the nation sold 602 million of the July 2017 bond at an average yield of 6.072% compared to 4.960% at the previous auction last month.
The bid-to-cover ratio was high in all the three bond issuances.
French Bond Auction
France sold 8.43 billion of debt in an auction today at lower borrowing costs.
France raised 3.34 billion from five-year notes at an average yield of 1.43% compared with 1.72% on May 16.
The country also sold 2.78 billion of two-year notes at an average yield of 0.54% compared with at an average yield of 0.74% at the last auction on May 16.
The nation sold 1.22 billion of 2015 notes at an average yield of 0.83% compared with 1.51% in the previous auction held on January 19 and 1.1 billion of 2016 securities at an average yield of 1.05% compared with an average yield of 1.40% in a similar auction on March 15.