Italy may have to soon ask EU and IMF ‘ bailout’ or it will default on its sovereign debt, as credit default swaps soar like they did with Greece:
Italian borrowing costs rose as the country sold almost 8 billion euros ($11.4 billion) of bonds amid speculation Finance Minister Giulio Tremonti will resign and concern that Europe’s bailout fund may not stop contagion.
Italy sold 2.7 billion euros of its 10-year benchmark bond, less than the maximum target of 3 billion euros. The debt was priced to yield 5.77 percent, which compares with 4.94 percent the last time the securities were sold on June 28. Demand was 1.38 times the amount sold, compared with 1.33 at last month’s auction.
With 10-year yields around 6 percent, Italian bonds show investors are concerned that the nation may be forced to join Greece, Ireland and Portugal in asking for a financial bailout from the European Union and the International Monetary Fund. With the biggest debt load in the European Union, the mechanisms put in place by the EU would need to be expanded if Italy asked for help.
“The auction came in a very difficult market moment, with the issue of the U.S. debt ceiling still unresolved and rumors during the morning of ECB buying and the possible resignation” of Tremonti, Chiara Cremonesi, a fixed-income strategist at UniCredit Research in London, wrote in a note to investors today. “All this did not help to create a friendly environment for the auction.”
Container shipping orders plunge indicating a severe fall in global business:
Plunging rates for chartering container vessels that carry sneakers, furniture and flat-screen TVs may signal a U.S. consumer slowdown and losses for shipping lines in what is traditionally their busiest time of the year.
Fees for hiring vessels have fallen 9.3 percent since the end of April, according to the Howe Robinson Container Index, which tracks charter rates for a range of vessels. Last year, the index surged 56 percent in the period, as lines added ships on demand from U.S. and European retailers restocking for the back-to-school and holiday shopping periods.
“The troubling part is that charter rates are falling in the peak season,” said Johnson Leung, head of regional transport at Jefferies Group Inc. in Hong Kong. “Sentiment among consumers and retailers isn’t very strong.”
Lines including Hanjin Shipping Co., Orient Overseas (International) Ltd. and Mitsui O.S.K. Lines Ltd. have also delayed the introduction of peak-season surcharges on Asia-U.S. routes by about two months as U.S. unemployment above 9 percent and slowing sales of new homes damp demand. Combined inbound container traffic at Los Angeles and Long Beach, the two busiest U.S. ports, dropped 4.6 percent last month, the first decline since January 2010, according to data compiled by Bloomberg.
“The delay in imposing peak-season surcharges shows how dire the situation is,” said Um Kyung A, a Shinyoung Securities Co. analyst in Seoul, who cut her rating on Korean shipping lines to “neutral” from “overweight” yesterday. “The U.S. economy isn’t recovering fast enough to help increase demand.”
China Shipping Container Lines Co., the nation’s second- biggest cargo-box carrier, fell 6.9 percent, the biggest drop in almost two years, to close at HK$2.17 in Hong Kong. China Cosco Holdings Co., the nation’s largest, declined 3.7 percent to HK$5.50. Hanjin Shipping Co., South Korea’s largest container shipping company, dropped 4.3 percent, the steepest drop in more than two weeks, in Seoul.
U.S. orders for durable goods unexpectedly dropped 2.1 percent in June, the Commerce Department said yesterday, as companies lost confidence in the strength of the recovery.
The cost of shipping 40-foot containers to the U.S. West Coast from China has slumped 42 percent over the past year to about $1,600 per box, according to data from Clarkson Securities Ltd., a unit of the world’s largest shipbroker. Derivatives show the price won’t exceed $1,962 before the end of next year.