Spanish Bond Auction Delayed – Contagion Hits

The Spanish power company Iberdrola delayed a planned bond auction worth 13.5 billion euros due to the terrible market conditions. Iberdrola is owned by the government, so this can be easily seen distrust for the Spanish sovereign. And the Irish troubles deepen as well. Update on these bad news for the Euro, that continues falling.

Bloomberg reports:

Bankers who were authorized yesterday to begin gauging investor interest in the first tranche of bonds will wait until the yield stabilizes on Spanish debt, which has been roiled by Ireland’s bailout request, said two people who asked not to be named because the process is confidential. The bankers are monitoring the market for a chance to proceed with the sale after the yield settles, a third person said.

“Going ahead with these bonds would have been almost crazy,” said  Ivan Comerma, who manages about 3 billion euros as head of capital markets at Banc International Banca Mora in Andorra. “It would be better to wait till the waters calm.”

This adds to the weaker-than expected state led bond auction that got yields that were double than the previous month. Those auctions were for short term bonds – 3 to 6 months.

The more important bonds, for 10 years, are losing as well. The yield on these bonds rose above 5%, and to the highest level in comparison with the German 10 year bunds.

Spain is Europe’s fourth largest economy, and may be “too big to bail“.

Irish troubles deepen

The failure of the Irish aid request to ease the markets accelerated contagion to other debt-laden countries-  Spain and Portugal. The Irish government presented the 2011 budget, which includes a 15 billion euro cut and also a dig into Irish pension funds.

Irish officials want to pass the budget until December 7th, but there are doubts that it will manage to pass it. Prime Minister Cowen already called for a general election following the same call from his coalition partner – The Greens.

S&P, that already downgraded the Irish credit rating to A, said that Ireland could downgraded again, even very son, if the budget doesn’t pass. Jamie Coleman reports that they were kind to mention that two thirds of negative warnings end in downgrades.

And the Anglo Irish bank began the “haircut” to bondholders. This was expected, but isn’t good news either.

The situation in the old continent is deteriorating into the US holiday of Thanksgiving. As news continues pouring from Europe on thin markets, we can expect even wilder action than now. Technical barriers may be broken.

EUR/USD now trades at 1.3366, between minor support at 1.3334 and 1.3440. See more technical lines in the Euro Dollar forecast.

Want to see what other traders are doing in real accounts? Check out Currensee. It’s free..