EURO ZONE GOVT YIELDS

Spain sold 10 billion euros ($13 billion) of bonds, twice the target for the sale, while Italy placed 12 billion euros of bills, easing concerns the countries would struggle to finance their debts and sending bonds higher. Italy, with the euro region’s second-biggest debt at almost 1.9 trillion euros, faces more than 50 billion euros in bond maturities in the first quarter, whereas Spanish bond redemptions in the period are about 2 billion euros.

Demand for the German debt was strong during the week with the cover ratio for the offering was 1.8, meaning there were almost twice as much demand for German govt bonds up for sale.

All these developments helped the yields ease further to strong technical support levels that we have been watching for some time. Spanish yields is now closer to the strong support at 5 levels. Greece yields is now closer to the upward trend line support at 32 levels (still very high). France yields is in the middle of its consolidation range. Portugal similar to Greece and Italy, now closer to the upward trend line support at 12 levels. Germany at the lower boundary of its consolidation and Italy close to the strong support at 6.5 levels.

Yes there is some positive sentiment out there but intermediate term outlook will depend on those technical levels being breached on the downside and giving way for lower borrowing costs for EZ.