Bloomberg News

France Sells 4.26 Billion Euros of 2-, 5-Year Debt Amid Crisis

October 20, 2011

Oct. 20 (Bloomberg) -- France sold 4.26 billion euros ($5.87 billion) of two- and five-year notes amid concern euro- area leaders are struggling to find common ground on expanding a bailout fund for indebted nations in the currency bloc.

The euro-region’s second-largest economy auctioned 2.775 billion euros of 2 percent securities maturing in September 2013, at a yield of 1.31 percent. Investors bid for 2.05 times the amount on offer, versus a so-called bid-to-cover ratio of 2.66 the previous time the debt was auctioned on Sept. 15.

France sold a further 1.485 billion euros of notes due July 2016 at a yield of 2.31 percent, attracting bids for 3.63 times the amount offered, compared with 1.54 times at the previous auction on Sept. 15.

“In particular, the September 2013 looks cheap,” Annalisa Piazza, a fixed-income strategist at broker Newedge Group in London, wrote in a research note today.

Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, indicated that leaders failed to resolve differences at an impromptu meeting in Frankfurt last night ahead of a summit this weekend.

French bonds fell for a third day, with 10-year yields rising two basis points to 3.22 percent at 10:36 a.m. in London. The spread or yield difference over similar-maturity bunds widened to as much as 119 basis points, a euro-era record.

“The widening is explained by worries about the possible contagion effects from the EMU debt crisis that could undermine the country’s fiscal position,” Piazza wrote. “Demand at today’s auction should be supported.”

France also sold 1.215 billion euros of three percent notes due July 2014, at a yield of 1.58 percent. Investors bought 2.98 times the amount offered, versus 1.85 times at the prior auction on July 21. An additional 2.105 billion euros of 2 percent notes maturing July 2015 were sold at a yield of 1.96 percent, attracting 1.97 times more bids than offers.

A sale of inflation-linked debt maturing 2016, 2027 and 2022 is also scheduled for today.

--Editors: Nicholas Reynolds, Mark McCord

To contact the reporter on this story: Garth Theunissen in London gtheunissen@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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