Little fortuitous timing never hurts..
We weighted the probabilities and reasons for China to come to Europe’s rescue (here). Now read the following:
Italy Seeks China Investment; Bond Deal Reported
Monday, 12 Sep 2011 03:41 PM
Italian officials have held talks with their Chinese counterparts about potential investments in the euro region’s third-largest economy, an Italian government official said.
The purchase of Italian bonds by China was not the focus of the talks, which took place in the past few weeks, the official said on condition of anonymity, without specifying which assets may be involved. A spokesman for Italian Finance Minister Giulio Tremonti declined to comment. News of the Chinese interest comes on the eve of a 7 billion-euro ($9.6 billion) bond sale.
Signs of contagion from the region’s sovereign debt crisis threatened to engulf Italy and pushed the country’s bond-yields to a euro-era record last month. Prime Minister Silvio Berlusconi’s government rushed through a 54 billion-euro austerity package to convince the European Central Bank to buy its debt. More than 60 billion euros of European bond purchases in the past five weeks has done little to shore up Italian debt.
The yield on the country’s 10-year bond rose 16 basis points to a five-week high 5.57 percent today, almost 4 percentage points more than the yield on comparable German debt.
A report in the Financial Times Monday that China would buy “significant” amounts of Italian government bonds helped U.S. stocks reverse losses in the last 90 minutes, as concern about Europe’s debt crisis eased. The Standard & Poor’s 500 Index rose 0.7 percent to 1,162.27 at the 4 p.m. close in New York.
Treasuries fell after the 10-year note yield reached a record low. The euro trimmed its decline and was little changed at $1.3645 and was down 0.5 percent versus Japan’s currency after slumping as much as 2 percent to a 10-year low of 103.9 yen.
With a debt of 1.9 trillion euros — more than Spain, Greece, Ireland and Portugal combined — Italy remains vulnerable to any rise in borrowing costs as it refinances maturing debt. The country still needs to sell about 70 billion euros of debt this year to cover its deficit and finance redemptions.
The report on China came on the eve of an auction of as much as 7 billion euros of bonds maturing between 2016 and 2021. The treasury is selling the debt to help pay for 14.5 billion euros of bonds maturing on Sept. 15.
Italy sold 11.5 billion euros of Treasury bills today and priced its one-year notes to yield 4.153 percent, up from 2.959 percent at the previous auction last month, as demand for the securities dipped.