Global shares up slightly but Spanish debt fears linger

Wed Apr 11, 2012 8:26am EDT
 
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By Richard Hubbard

LONDON (Reuters) - Spanish and Italian debt eased back from a sharp sell-off on Wednesday and shares staged a modest recovery but investors are wary of signs that the euro zone's debt problems are getting worse or that global growth is flagging.

Yields on Spain's benchmark 10-year bonds fell 11 basis points to around 5.88 percent after rising to nearly six percent on Tuesday on new concerns about the government's ability to cut its deficit.

Italian bond yields fell 14 basis points to 5.56 percent, although yields at a 12-month Treasury bill auction jumped, reflecting doubts about the euro zone and nervousness ahead of a bigger sale on Thursday.

"We are having a kind of mini perfect storm with the conjunction of euro zone crisis flaring up, Chinese inflation and the U.S. labor market data," said William De Vijlder, chief investment officer of BNP Paribas Investment Partners.

Despite the concerns, safe-haven Germany saw soft demand when it offered the lowest ever yield for its 10-year bonds at an auction on Wednesday.

German government bond futures extended their losses after the auction. The main Bund futures contract sank to a day's low of 139.59, a fall of 73 ticks, from around 139.80 before the auction results.

OUTLOOK FEARS

After a strong first quarter for global asset markets thanks largely to massive liquidity injections by the world's major central banks and some positive economic numbers, investors have begun the second quarter more nervous about the outlook.   Continued...

 
A man passes an electronic screen displaying graphs of the movements of share prices around the world as cherry blossoms are in full bloom in Tokyo April 9, 2012. REUTERS/Yuriko Nakao