Spanish and French bonds gained and the euro strengthened after the governments sold debt. Stocks erased losses and U.S. index futures pared declines. The yield on Spain’s five-year bonds fell 22 basis points to 5.64 percent at 10:05 a.m. in London, with France’s 10-year yield dropping 21 basis points to 3.18 percent. The euro appreciated 0.4 percent against the dollar. The Stoxx Europe 600 Index added 0.2 percent, after dropping as much as 0.8 percent. Standard & Poor’s 500 futures slid 0.2 percent, following the stock gauge’s 4.3 percent surge yesterday. Spain sold 3.75 billion euros of bonds, the maximum amount planned, and French borrowing costs declined in its auction of 10-year notes. European Central Bank President Mario Draghi said the bank’s program of buying government bonds “can only be limited,� a day after six central banks made additional funds available to ease strains from the crisis and the People’s Bank of China cut banks’ reserve requirements for the first time since 2008. The French government sold 1.57 billion euros of 10-year bonds at an average yield of 3.18 percent, the Bank of France said. At its last auction on Nov. 3, the average yield was 3.22 percent. The average yield on Spain’s five-year bonds due January 2017 was 5.544 percent, compared with 4.848 percent when notes with a similar maturity were auctioned on Nov. 3. U.S. futures signal the S&P 500 will halt its steepest three-day rally since March 2009. The gauge jumped yesterday after the Federal Reserve said in a statement the premium banks pay to borrow dollars overnight from central banks will fall by half a percentage point to 50 basis points. The so-called dollar swap lines will be extended by six months to Feb. 1, 2013. The yield on 10-year Treasuries rose three basis points, after jumping eight basis points to 2.07 percent yesterday. ----With assistance from Will Hadfield, Sharon Lindores, Daniel Tilles and Jason Webb in London. Editors: Stephen Kirkland, Mark Gilbert, Shiyin Chen To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Shiyin Chen in Singapore at schen37@bloomberg.net To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net

Source