EURUSD hit fresh lows of 1.2858 yesterday, after an Italian auction of long-term debt did not go nearly as well as the shorter term auctions the day before. The yield on 10-year bonds was just a whisker lower than the unsustainable 7% level (at 6.979%), and in spite of the Treasury aiming sell EUR8.5bn of its debt, only around EUR7bn could be placed. The silver lining to be gleaned from the event was that yields on bonds with maturities between 3 and 10 years were all lower than last month's record highs; but this news was clearly not encouraging enough to support prices in the secondary market as the ECB still had to step in to prop up the bonds later on.
All this adds up to a sour end of 2011 for Italy and the Eurozone, and an indication of how tough 2012 is likely to be when politicians return to the task of managing the sovereign debt crisis. While the pessimism surrounding the Eurozone has noticeably impacted both the currency and bond markets, equities have actually performed rather well in the past day. In this morning's Asian session, the Nikkei has closed up 0.7%, with the Hang Seng up 0.4% and Shanghai Composite also up 1.2%.
Coming up in today's session, the Swiss National Bank will publish its latest balance sheet data and the Bank of England will release the latest UK housing equity withdrawal numbers, but otherwise it will be a rather quiet day on the data release front.
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