Concerns about Spanish debt weaken the EURO
Spain’s treasury yesterday paid the highest yields recorded in 14 years to issue €3bn of 3 month T-bills, with yields more than doubling to 5.11%. The fact that the 5.11% yield was reached on shorter dated debt reflects the current widespread uncertainty in the market, as opposed to the ability of politicians to solve the crisis.
Jose Manuel Barroso, the head of the executive EU commission, is set to unveil plans for Euro Bonds today, despite vehement opposition from Germany. The proposal is expected to state that for the Euro Bond to work, more intrusive control of national budgets by EU would be required. Germany and France are in full support of more control over national budgets, but Germany is in strong opposition of the issuance of Euro Bonds. Wolfgang Schaeuble, the German Finance Minister, said that the issuance of Euro Bonds would not address the root of the problem, as it would take away the pressure on countries to address their debt.
This morning, the Eurozone PMI surveys showed the service sector expanding more than expected, coming in at 47.8 this month against expectations of 46.5. However, PMI Manufacturing contracted to levels last witnessed in mid- 2009, falling to a level of 46.4 and worryingly, data revealed that part of this activity was driven by firms winding down backlogs. This suggests that the Q4 data could see PMI figures deteriorating further.
Today sees the release of BofE MPC minutes, which are expected to show the bank still favouring further asset purchases in the near term due to the continuing uncertainty in the Eurozone and the raft of poor data releases from the UK.
What does this all mean for me? Well buying your EUR, USD, AUD or any other currency at the wrong time could cost you a fortune. There is no crystal ball but Currency UK can give you the information you need to make an informed decision.