The low bid-to-cover ratio at the Italian bond auction disappointed the markets and left the EUR sagging, pushed core government bonds higher but had little impact on equities. Thursday’s very strong Spanish auction results set the bar too high for Italy, and the cover of just 1.22x couldn’t make up for the fact that the yield was down sharply and the EUR 4.75B raised was the top end of target. EUR/USD, which opened with a bid tone, slipped to 1.2766 from a 1.2879 high. Otherwise the spot market was pretty dull, EUR/CHF pivoted around 1.21, USD/JPY traded 76.85-76.66 all day. GBP/USD paid no heed to an unexpected drop in November factory gate inflation and stayed close to 1.5350. Core government bonds rallied post auction, and March bunds are currently +0.40 at 139.55, while March gilts are +0.20 at 116.79. Peripheral bond yields are off session lows, the Italian 10-year yield stands at 6.57%. The main European equity bourses are up between 0.3% and 1%, gold trades $6.80 lower at $1643.40/oz, February Nymex crude is flat at $99.30/bbl.
EasyForexNews Research Team