Italian Bond Auction: 10-Year Yield Dips Below 7%

The yield on10-year Italian bonds fell from the euro era highs reached in November, settling slightly below the market-sensitive level of 7 percent in an auction on Thursday.
Italy sold just over 7 billion euros ($9 billion) in longer-dated bonds in the auction, against a planned range of between 5 billion and 8.5 billion euros.

The yield on the 10-year bond fell to 6.98 percent from November's 7.56 percent.

Yields on three-year Italian debt fell to 5.62 percent, much lower from 7.89 percent in a similar auction a month ago.

The euro [EUR=X  1.288    -0.0056  (-0.43%)   ] pared some of its losses immediately after the auction but then dropped further to almost one-year low against the dollar. European shares were virtually flat in thin trading.

"Are we going to see in the next few weeks a significant rally in Italian bond yields? The answer is probably not," Bob Parker, a senior advisor at Credit Suisse, said.

Investors were looking to the auction to see whether appetite for the country's debt had returned, after yields halved in the sale of six-month T-bills on Wednesday. 

Some analysts have warned about the dangers posed by the fact that around 193 billion euros of Italian debt is coming due next year, with 91.7 billion euros due to be refinanced between February and April.

Parker said his central scenario was that the country will get through it.

"Italy still has a very high domestic savings rate, the duration of its debt is over 6 years," Parker said.

But he also warned that other countries, when they were confronted with a series of failed auctions, had to ask for bailouts as yields on their debt jumped to unsustainable levels.

"What's the extreme event? The extreme event is that we could have a series of failed auctions," Parker said.

"There is a good 20-25 percent probability that a failure in a debt auction could send yields spiraling higher," he added.

Italian Prime Minister Mario Monti said the auctions were positive but warned that market volatility could continue, according to Reuters.

"Auctions held yesterday and today went rather well, but the financial turbulence absolutely isn't over," Monti said during a traditional end-year press conference.

Retailers may return some cash to investors in 2012

With excess cash on hand from years of cautious spending and slower store growth, retailers in 2012 will focus on returning capital to investors via share buybacks and dividends, according to a Credit Suisse report.

The firm's analysts estimate that share buybacks will reach $36.2 billion next year. That's a slight decline from $37.4 billion in 2011, but well above $20.7 billion in share repurchases seen in 2008.

While capital spending is expected to increase, it will be nowhere near peak levels of 2006-2007.

Beyond share buybacks and dividends, retailers are also expected to focus on international growth, e-commerce, marketing programs (including loyalty programs), and remodels.

Offering automotive parts retailer AutoZone as an example, the report underscores that buybacks work best when combined with strong company fundamentals — supporting stock through lower earnings years and amplify earnings improvement in the better years.

For 2012, the report calls Home Depot and Lowe's the most interesting names in the retail space.

"While these names do not have the highest yields in the segment, buybacks can support earnings today, while the housing market remains challenging," says the report. "In the long term, if one believes in a housing recovery and that these companies can deliver upside to margins, the higher earnings combined with the years of buybacks should lead to much stronger [earnings per share] growth and strong stock performance."

Credit Suisse analysts also expect to see significant returns of capital for shareholders from department stores.

Macy's could buy back about $1 billion of stock in 2012 and double its annual dividend to $0.80 from $0.40, says the report.

Kohl's is also seen increasing its dividend, which was initiated for the first time ever in 2011, and buying back about $800 million in stock next year.

In addition, Dillard's and Saks "both will have capacity to return meaningful amounts of capital in the form of share repurchases and dividends in the coming year," says the report.

Strong outlooks and the financial flexibility put CVS and Kroger in a good position to continue returning cash to stockholders for the foreseeable future. "We estimate they should buy back 7% to 8% of their current market capitalization in 2012," says the report.

Just this week, CVS announced a 30% increase in its quarterly dividend.

Equipment suppliers are viewed as most likely to actively repurchase shares in the near-term, with International Game Technology taking the lead. According to the report, every $50 million of stock repurchased could add $0.01 to EPS for the company.

"Earlier this year, the company announced a new $500 million share repurchase program, and with $1.3 billion in free cash flow through fiscal 2013, management appears eager to return cash to shareholders, particularly as fundamentals are improving," says the report.

However, retailers with high cash flow yields but weak fundamentals may not benefit from buybacks. Among them, Best Buy, GameStop, Sears, Staples, and Bon-Ton Stores.

"While buy backs may support EPS in the near term, the stocks may not be rewarded if the companies cannot demonstrate net income growth," says the report.

If used right, credit card balance transfers can save cash

New Year's resolutions are supposed to be big and bold. Sure, you could resolve to alphabetize your spice cabinet in 2012, but why not shoot for something that will make a meaningful change in your life?

Reducing debt is a noble and liberating resolution, and this year, it's a common goal. Paying off debt was the third-most-popular financial resolution for 2012, up from seventh last year, according to a survey by Fidelity Investments. (Saving more came in first, followed by spending less.)

Good intentions will get you only so far, though. If you're carrying around a credit card balance with a high interest rate, getting rid of debt is even more difficult than shedding those extra pounds you packed on over the holidays. One way to free yourself from a high interest rate is to take advantage of a balance transfer offer. In recent weeks, credit card companies have sweetened these deals, offering terms that haven't been seen since 2008, says Bill Hardekopf, chief executive of LowCards.com. Some are offering 0% interest for up to 21 months.

Under the right circumstances, a balance transfer offer can save you a lot of money. For example, suppose you have a balance of $5,000 on your credit card with an APR of 15%. If you transfer it to a card with a 0% interest rate for 12 months, you'll save $750 in interest.

There are, however, drawbacks to balance transfer offers. The biggest is this: If you're really desperate to lower your interest rate, you probably won't qualify for the best deals. Credit card companies are primarily interested in customers with good to excellent credit, Hardekopf says. That typically means a credit score in the mid-700s, if not higher.

Other downsides:

•Fees. Most card issuers charge a balance transfer fee of 3% to 4%. That means transferring a $5,000 balance will cost you $150 or more. To make the transfer worthwhile, you'll need to save more than that in interest.

•Take-no-prisoners terms. Don't sign up for a balance transfer deal unless you're confident you can afford at least the minimum payment every month. Make even one late payment, and your introductory rate will probably disappear.

•A high permanent APR. If you fail to pay off your new credit card before the introductory period ends, the interest rate on your remaining balance could skyrocket.

For example, Citi Platinum Select offers a 0% interest rate for 21 months on the balance transfer and new purchases, with a 3% balance transfer fee. However, once the introductory rate expires, your interest rate will range from 11.99% to 20.99%, depending on your credit rating.

For that reason, you should avoid using the credit card while you're paying off your balance, even if the introductory rate includes new purchases, Hardekopf says.

"You're probably transferring your balance because you're under some kind of financial strain," he says. "Don't be throwing dirt on yourself when you're in the hole already."

Another option for high-interest debt is a debt consolidation loan. Some banks and credit unions are offering unsecured personal loans with interest rates of 10% or less, which can be used to pay off high-interest debt.

A debt consolidation loan is like dynamite, says Scott Halliwell, a financial planner for USAA. In the right hands, he says, it can do a lot of good, but if used incorrectly, "it's pretty dangerous."

Like a balance transfer, a debt consolidation loan could leave you deeper in debt, Halliwell says. To avoid that, you need to develop a realistic budget that forces you to live within your means without using credit cards, he says.

You'll also need to create an emergency fund, Halliwell says. Otherwise, there's a good chance you'll end up using credit cards to pay for unexpected expenses, such as car repairs or medical bills.

Ideally, your emergency fund should cover three to six months of living expenses. Halliwell recommends making minimum payments on your credit cards until you've built up this fund.

Once you've reached your goal, he says, you can start paying down your debt in earnest.

Halliwell acknowledges this advice seems counterintuitive. The average bank savings account is paying less than 1% interest, while the average interest rate for a variable-rate credit card is 14.56%, according to Bankrate.com.

Without an emergency fund, though, something as ordinary as a blown tire could force you to take on even more high-interest debt, Halliwell says. "I'm a big believer that you'll never get out of debt until you have cash in the bank."

A richer 2012: A monthly guide to maximizing money

NEW YORK (AP) It's time to pencil some savings into your 2012 calendar

Throughout the year, there are steps you can take to pocket extra cash, whether it's booking airline tickets a month in advance or setting aside tax-free wages to pay for health care. In many cases, these actions can result in substantial savings over time.

The problem is these moves typically require some degree of planning. And when you're juggling work and the daily tasks of life, such opportunities have a way of sitting on the back burner until it's too late.

To avoid another year of missed chances, here is a guide to simple money-saving moves you can make each month in the year ahead. Scan it now to see whether there are any particular dates or actions you want to flag, and keep the list handy.

You may discover you've been leaving free money on the table for years.

JANUARY

DEBT: It's a perennial New Year's resolution, but there's extra incentive to pay down your debt right now. Cash still isn't earning much interest sitting in deposit accounts, with the average rate for a one-year CD clocking in at just 0.35%, according to Bankrate.com. So if you're sitting on extra savings, consider using it to knock off any accumulating credit card debt.

TAXES: To make the most of your taxes, designate a file folder or kitchen drawer where you can keep receipts and other necessary paper. A common roadblock when filing returns is a lack of documents to claim deductions.

COLLEGE: Families with college-bound kids will want to get their taxes squared away early. The income and asset figures from the returns will be needed to fill out the Free Application for Federal Student Aid (FAFSA), which should be completed as soon as possible after Jan. 1. An early application improves the chances of receiving aid from multiple sources. To fill out the form, go to fafsa.ed.gov.

FEBRUARY

SPENDING: Flowers can become a big part of your Valentine's Day spending, especially if you procrastinate. If you plan on sending a bouquet, start browsing websites early to avoid inflated delivery charges on last-minute orders.

CREDIT CARDS: Sweeping credit card reforms have banned a number of misleading billing practices. But the new rules don't set guidelines on rewards programs, which cardholders often fail to use to their full potential. Take a few minutes to understand the caps, expiration dates and redemption process of your program; a few tweaks to your spending habits could boost the cash back rewards or points that you earn.

ENTERTAINMENT: If you realize you haven't seen any of the Oscar nominated films even though you've been paying for premium TV channels, it might be time to trim your cable package. The trial offers you were given when first signing up may also have expired.

ENTERTAINMENT: While you're at it, commit to a cap on how much you'll spend on online entertainment each month. It's easy to lose sight of how much you're spending when all you have to do is click "buy."

MARCH

TRAVEL: If you're planning a spring break, remember that the best time to book a flight is four to six weeks before traveling; prices for any given flight are generally highest in the few weeks just before and after that time frame. Airlines also offer the most sales on Tuesdays, Wednesdays and Thursdays.

SPENDING: As you store away your cold-weather gear, make a list of any items that need to be replaced for next winter. Then hit the clearance sales and avoid impulse buys by shopping only for items on your list.

APRIL

TAXES: Don't panic if you haven't filed your taxes yet. You have until October if you file for an extension, but you'll need to do that, and pay any taxes that are due.

BANKING: In honor of Earth Day, check to see if you can save a few bucks by opting for e-statements. The monthly service fee for a basic checking account at U.S. Bank, for example, is $6.95 when customers opt for e-statements. If customers opt for paper statements, however, their monthly fee is $8.95. And while you're making tweaks to your bank account, consider setting up automatic bill pay to avoid late fees.

MAY

SPENDING: If you're dining out on Mother's Day, go online to see if there are any deals available at your mom's favorite restaurants. Start with sites such as BiteHunter.com and Restaurant.com; if your mom is a fast food junkie, try EatDrinkDeals.com.

HOME: Before the weather gets too hot, consider investing in a more efficient air conditioner to save on energy costs. Keep in mind that getting a unit that's too powerful for the space you're cooling can be just as wasteful as getting one that's too weak. The recommended capacities for various room sizes can be found at energystar.gov .

COLLEGE: If you're the parent of a high school sophomore or junior, start planning a tour of college campuses this fall. Think about coordinating the visits with another trip and try to get in as many nearby campuses as possible to minimize travel costs.

JUNE

SPENDING: If you have multiple wedding ceremonies to attend this summer, think about where you can cut corners. This could be as simple as limiting how much you spend on new clothes or teaming up with others to buy group presents.

HOME: It's National Homeownership Month and interest rates on mortgages should still be near record lows. If you're still not sure whether you're ready to become a homeowner, check out the renting versus buying calculator on Ginnie Mae's website.

HOME: Homeowners should check whether it's worth refinancing. The general rule of thumb is that the new rate should be at least 1.5 percentage points below your current rate. Otherwise closing costs may not make the savings worthwhile.

JULY

INVESTING: The mid-year checkup on your investment portfolio is even more critical in times of market volatility. You want to be sure that market gains and losses haven't knocked your mix of stocks, bonds and cash out of balance. If you don't have a financial planner, consider rebalancing with the help of an online portfolio tool.

HEALTHCARE: If you're inspired by the Olympics set to take place in London, check whether your employer offers any discounts for health club memberships or programs.

COLLEGE: This is the time of year that families apply for private student loans to bridge funding gaps for college. When evaluating the options, be sure you understand whether the loan has a variable interest rate and what the options would be if payments can't be honored. The rates and terms on private student loans are far less forgiving than on federal student loans.

AUGUST

SPENDING: Several states offer tax holidays for back-to-school items on a designated weekend. The timing varies by state, but tax holidays usually start early in the month. If your state had a tax holiday last year, it may run again this year. The Federation for Tax Administrators offers a list of this year's dates and qualifying purchases.

TRAVEL: It's time for a little number crunching. Set aside an hour or two to review your summer travel and recreation expenses. See how much your vacation ended up costing, compared with how much you intended to spend. Make a note of unexpected expenses you could have avoided and file it away for next summer.

SEPTEMBER

COLLEGE: The rise in college costs has far outpaced the rate of inflation; tuition and fees alone are an average of $17,000 a year at public universities. In honor of National College Savings Month, consider setting up a 529 college savings plan for your child. These work like 401(k) accounts and let families invest in the market and withdraw money tax-free to pay for education. Each state offers its own plan; families can invest in plan from any state they like, but there are often tax benefits to picking one from home.

SPENDING: The holiday shopping season is rapidly approaching. Keep spending in check by starting to pay down debt and mapping out a budget.

OCTOBER

HEALTHCARE: Open enrollment season arrives in workplaces across the country. Many companies have been tweaking their benefits to keep pace with rising health care costs, so make sure you're still signed up for the plan that best fits your needs. Also consider opening a flexible spending account for health care costs. These accounts let you set aside tax-free wages for items such as copays and medications.

HEALTHCARE: While you're thinking about healthcare, don't forget to evaluate how much you spend on medications. Over-the-counter drugs are as much as 50% cheaper at Target and Wal-Mart than at supermarkets, according to Consumer Reports. The big box retailers also charge $4 for a 30-day supply of many generic prescriptions, or $10 for a 90-day supply. Other chains, such as CVS and Rite Aid, offer similar programs.

NOVEMBER

INSURANCE: As you start to review your expenses for the past year, check whether you can cut your auto insurance payment. If you have some savings, you may be able to lower your rate with a higher deductible, or you may not need as much coverage if your car has aged and depreciated in value since you first signed up for coverage. A clean driving record since then may also qualify you for a lower rate.

TAXES: Start thinking about the year-end moves to lower your tax bill for 2012. For example, consider maxing out contributions to your retirement accounts if you haven't done that already.

COLLEGE: It's time to have a money talk with new college graduates. The six-month grace period on student loans for May graduates is coming to an end. To make sure your child's credit record remains clean, help work out a budget to juggle payments, rent and living expenses. Graduates who are still looking for employment should investigate their deferment options.

DECEMBER

SPENDING: You don't have to brave the crowds even if you haven't gotten around to your holiday shopping. Check out the hundreds of retailers that participate in Free Shipping Day in the middle of the month at freeshippingday.com. Don't forget to tap into retailers' social media sites to stay on top of sales.

GIVING: If you plan to give to a charity during the holidays, be sure the group you're donating to is qualified before making a donation. Remember that charitable contributions can only be deducted if you have receipts to back them up. Further guidance is available on the IRS website.