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US financial press put Spain under the spotlight

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NEW YORK | It’s been a bad day for Spain in Wall Street’s most read media. The tepid bond auction is to blame: Spain sold a total of $3.43 billion in bonds with maturities between 2015 and 2020, near the bottom of its target volume. Spain expected to sell between $3,28 billion and a planned […]

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NEW YORK | It’s been a bad day for Spain in Wall Street’s most read media. The tepid bond auction is to blame: Spain sold a total of $3.43 billion in bonds with maturities between 2015 and 2020, near the bottom of its target volume. Spain expected to sell between $3,28 billion and a planned maximum of $4,6 billion. There was a weaker demand and therefore it had to pay higher yields than in prior auctions. Yields climbed also in Italy and pushed stock markets down across the region.

The Wall Street Journal considers that this auction “pointed to a critical problem for Europe’s financially stressed governments: Who will buy their debt?” In an article called “In Tepid Sale Adds to Spain’s Woes”, Rupert Murdoch’s flagship newspaper asks:

“As demand from domestic banks weakens, who will take their place? Already, a dearth of foreign buyers.”

In a different article from the same newspaper, under the “Heard on the street” section, it says that

Spain’s fate in the hands of the ECB: The euro-zone crisis thermometer is rising again […] With an economy in recession, further austerity planned and banks fragile, a crunch may be approaching—and it is the European Central Bank that is likely to play the decisive role.”

New York’s major Michael Bloomberg’s news agency ran three stories on the subject.

The main one, also found in other news outlet, is regarding the impact the worst-than-expected bond auction had in the US market, where this Wednesday a 1% correction took place. It is one of the two main reasons for the sell off, together with markets realizing there will be no further quantitative easing by the FED. Under the headline “Stocks, Commodities Drop on Fed Minutes, Spanish Auction”, Bloomberg highlights that the cost of insuring sovereign debt rose:

“Swaps on Spain jumped 22 basis points to 461, the highest since November, according to CMA.”

The auction is also in another report on summing up Rajoy’s reaction:

“Prime Minister Mariano Rajoy said Spain’s situation is one of “extreme difficulty” and signalled that his budget cuts are less painful than a bailout would be, as demand for the nation’s debt slumped at an auction.”

Cable television where also running stories on Spain: CNN’s Richard Quest opened his program with an interview with analyst Todd Benjamin:

“How are you going to pay for it? Sometimes you have to hold of in thinking how are you going to pay for it… in the US they are focusing on growth, and they will focus on the deficit later”.

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