Stocks rise as investors lap up risky debt

Tim Wallace
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INVESTORS enthusiastically bought Spanish and French debt in auctions yesterday, prompting a mild euro rally and positive stock market moves.

France sold €7.97bn (£6.66bn) medium-term debt. The yield on its two-year debt came in at 1.05 per cent, the three-year at 1.5 per cent and the four-year at 1.89 per cent.

Those yields are lower than in similar auctions last year, despite the Standard & Poor’s decision to remove France’s triple-A credit rating.

Spain also tapped the markets, selling €6.61bn in four, seven and 10-year bonds – substantially more than the €4.5bn planned.

The four-year debt sold at a yield of 4.021 per cent, slightly up on the 3.912 per cent paid earlier in the month, whilst yields fell from 5.11 per cent to 4.541 per cent on the seven-year bonds and from 6.975 per cent to 5.403 per cent on the benchmark 10-year bonds.

The successful auctions pushed yields up slightly for “safe haven” countries – yields on 10-year UK gilts rose 0.089 percentage points to 2.05 per cent, while 10-year bunds edged up 0.075 to 1.86 per cent.

Stocks received a boost, with the French CAC40 index jumping 1.96 per cent, the German DAX up 0.97 per cent and the FTSE 100 up 0.68 per cent.

The euro rose 0.635 per cent against the dollar. And volatility has fallen to 19.9 on the VIX – near its long-term average of 19.04.