Today Spain will test the capital markets with a downsized E2-3 billion 5 year issue (from E4.5 billion) carrying a 3% coupon. The yield on the note is expected to come higher than existing comparable maturities which are trading at 3.3%, thus pricing will likely be in north of 3.5%. At the end of March, Greece managed to raise 5 year bonds at 2.8%: there are no concerns that Greece will be able to repeat that result, much to the negative P&L of all those who bought into the last bond issue. "Spain is firmly in the eye of the storm, and the Spanish
treasury cannot allow this sale to fail," said Jose Garcia
Zarate at consultancy 4Cast. Yet as we showed yesterday, traders are not so worried about Spain, whom they have pretty much written off now, as the UK, France and Germany. In the meantime, the PIIGS fire is raging: Greek 3 Years just hit 15%, as its CDS trades 30 bps wider since the NY close, now at 877 bps. And the eye of the hurricane is moving west: Portugal CDS hit another high of 456 bps today, implying a 33% chance of a sovereign default. Lastly, the euro is plunging and after hitting an overnight support in the low 1.27 area, has bounced slightly. Spain will need all the help it can get. In the very least, today will be a test whether the recent rumor spread by a prominent nationalized and GGB heavy UK bank, that Spain has requested a E280 billion rescue package, was true or not.
GENEVA — Airlines canceled hundreds of flights across Europe and added hours to trans-Atlantic journeys Sunday as planes were diverted around a large plume of ash spewed by an Icelandic volcano and stretching from Greenland to Portugal.
So far, the weekend cancellations have been a fraction of the flights nixed two weeks ago when jittery European air traffic authorities closed down much of the continent's airspace for fear the volcano's abrasive ash could harm jet engines. But the possibility loomed of continuing eruption, and rising costs to airlines from ongoing disruption.
The bulk of the cloud, measuring 2,100 miles long and 1,400 miles wide (3,400 kilometers by 2,200 kilometers), stretched over the North Atlantic, according to the Irish Aviation Authority. It ordered Ireland's five westernmost airports to close Sunday afternoon but allowed the country's three biggest airports in Dublin, Shannon and Cork to stay open.
Airlines diverted their trans-Atlantic traffic north and south of the cloud, causing congestion as planes tried to squeeze through remaining routes. Some connections were canceled entirely because of an offshoot of the main cloud that was snaking its way from Portugal through Spain, southern France and northern Italy, then up to Germany, the Czech Republic and Austria.
Eurocontrol, the Brussels-based agency that coordinates air traffic control centers throughout the continent, warned airlines to plan on taking on more fuel for the longer flight around the North Atlantic no-fly zone.
It said there would be approximately 24,500 flights within the European area Sunday, about 500 below average for this time of year. It said the ash cloud hovering over the continent was expected to dissipate and that most of the closed airports were likely to reopen later Sunday.
Daniel Gerstgrasser, a meteorologist with Switzerland's national weather agency, said rain would help wash out the cloud by Monday morning and no further ash drifts were expected to reach the continent in the coming 24 hours.
Longer-term forecasts were less clear. Meteorologists say that until Eyjafjallajokul (pronounced ay-yah-FYAH-lah-yer-kuhl), the volcano in southern Iceland, stops erupting, the future course of Europe's ash crisis will depend heavily on the prevailing winds. The eruption of the glacier-capped volcano has shown no signs of stopping since it began belching ash April 13. It last erupted from 1821 to 1823.
Irish airline Aer Lingus apologized to its customers for a string of flight cancellations since Tuesday, when the ash threat returned to Irish air space after a two-week break. Its trans-Atlantic services to Boston and New York were operating Sunday subject to delays.
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