Onto Italian Auctions, Italian 10 yr at 7.38%

All eyes on Italian bond auctions, UK in focus as Autumn Statement looms, Italy bond auction due, S&P said to downgrade France in 10 days according to La Tribune, after Fitch puts US on negative outlook, US consumer confidence expected to rebound.

Italy returns to the bond markets for another 8bn of 2014, 2020 and 2022 (3, 5 and 7 year BTPs) with yields stubbornly above 7% as European finance ministers meet to discuss the release of the next aid tranche to Greece, and whether Greece has complied with all conditions. Yields on Italian 10- yr BTPs hit 7.38%, nearing the 7.43% high reached on Nov 9.

The UK is back in the spotlight after yesterdays downgrade of UK growth forecasts for 2012 by the OECD to 0.6%. The organisation also said that it was likely that the UK was already in recession for Q4, and would post negative growth for Q1 next year as well. Compared to Europe the UK may be in better shape, growth wise but thats not much comfort given that the EU is one of the UKs biggest export markets.

The Office of Budget Responsibility will have no choice but to downgrade its UK growth forecasts as well, making the Chancellors job much more difficult and have to redo his sums as the income expected over the next 5 years will be not as much as expected with some estimates that the shortfall could be as much as 50bn.

Yesterdays warning about ratings from Moodys proved remarkably prescient after Fitch put the USs triple A rating on a negative outlook after the US market close, citing declining confidence that timely fiscal measures necessary to place U.S. public finances on a sustainable path will be forthcoming following failure of the Congressional Joint Select Committee on Deficit Reduction (JSCDR) to agree at least USD1.2 trillion of measures to cut the federal budget deficit.

This above news was followed by a report in La Tribune that S&P could downgrade France in the next 10 days as we head towards a key French auction this week. Any move on the French rating would effectively kill whats left of the EFSF.

US consumer confidence for November is expected to improve from Octobers number in the wake of last weeks post Thanksgiving retail Black Friday pop.

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