What's Happening in the Financial World? (11/29/2011) Italy Borrowing Costs, New Toyota GT

The cost for Italy to borrow money rose again, and to an unsustainable level. The nation’s 10-year paper yield increased to 7.56%. The southern European nation cannot cover its deficits for long when it needs to pay such a high sum for capital. The news about Italy makes a broad solution to the eurozone debt crisis even more pressing. Most analysts believe that credit rating agencies will downgrade more sovereign debt in the region, along with ratings of EU-based banks. The collapse of the euro still may be only weeks away without a solution to these borrowing cost problems.

Yahoo! (NASDAQ: YHOO) continues to be for sale. The markets do not believe that buyers will pay much of a premium even with the multibillion-dollar value of its Asian assets, which include stakes in China e-commerce company Alibaba and Yahoo! Japan. Yahoo!’s shares trade between $15 and $16, about where they were six months ago. The slow growth of the portal’s primary advertising business is not enticing enough to bring high offers.

Toyota (NYSE: TM) launched a new high-end coupe with Subaru. The GT 86 is meant to help revive the large Japanese car company’s image, which was tarnished by the recall of millions of cars. Toyota’s sales also have been hampered by production slowdowns due to the March Japanese earthquake. One car will not be enough to change the perception of Toyota, particularly one with the modest features of the GT 86. The rear-wheel drive car puts out only 197 bhp. That is inadequate to make it any more than mid-priced, mid-sized sports car in a segment of the market that already has a number of competing products.

Also in the car news, General Motors (NYSE: GM) has offered owners of Chevy Volts the opportunity to use loaner cars if they are concerned about engine fires the government has discovered. The loaner car program is effectively the end of the Volt. It is an admission by GM that the problem is serious and will be long-lived. GM has sold only a few thousand units since the launch, but the Volt was a cornerstone of the “new GM,” compared to the “old” one that declared Chapter 11. The remnants of the old firm’s poor car design capacity live on in the Volt.

Douglas A. McIntyre