Markets adjust to politics
AFP PHOTO / FRANK RUMPENHORST GERMANY OUT
Markets reacted mildly on 9 May to the new uncertainties that have appeared on the Eurozone's horizons, with the skies looking grey over Athens and Paris.
The single currency retreated slightly bellow the 1.30 benchmark with the dollar, while interest rates of the German sovereign debt decreased further and the yields on the Spanish and Italian state debt paper going upwards, following the model of the last few months when uncertainty grows thicker.
The German treasury sold five year bonds (bobls) of a total value of €4.032 billion at the lowest ever average yield of 0.56%. The average sale price of the bonds was bellow par at 99.70 and the coupon of the issue was 0.50%. At the same time, the yield of the benchmark ten year German bund, in the secondary market is being negotiated today at levels even bellow the historically low of 1.53%, achieved recently.
Many German economist however do not consider those low rates as a positive development, pointing out that they underestimate risks and subsidise the German borrowing.
Meanwhile, the Greek political dead end has already affected the Spanish and Italian debt markets, with investors asking for bigger premiums in order to take more risks in Madrid and Rome.
Unfortunately, the chances of Athens having a government from this newly-elected Parliament are becoming everyday thinner. Today Antonis Samaras, leader of the centre-right New Democracy party, which came first in last Sunday's legislative elections, said he is not going to participate in a coalition government under Alexis Tsipras, president of a Europe inclined left political formation called SYRIZA which came second.
Samaras took last Monday from President Karolos Papoulias, the first mandate to form a government, but he returned the offer. Next in the line was Tsipras. Seemingly neither Tsipras stands a chance to form a government with a parliamentary backing of 151 deputies in a house of 300.
Last but not least there is still no indication if the new French President François Hollande and the German Chancellor Angela Merkel are to find common grounds, so as the Eurozone could counter its current problems of sovereign debt and recession all over the euro area except Germany.
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