Archive - Jan 11, 2011

Europe is now literally living day to day. After last night it was announced that Japan is joining China in purchasing a substantial portion of European debt, using its FX reserves to buy up to 20% of European issuance and thus becoming simply the latest selfish trade surplus country doing all it can to keep its key export partner afloat (to the detriment of USD bond purchasing, confirming the Fed's monetization of debt will never end), today that ultimate backstop, the ECB, has for the second day in a row been purchasing Portuguese bonds to make sure there is no collapse in the sovereign debt market. The good news: Greece managed to place €1.95 billion in 6 month Bills... at the ridiculous rate of 4.9% and 3.4 Bid to Cover, which nonetheless happened to be an deterioration in both rate from the previous November 9 Bill auction, printing at 4.82%, and had a much higher 5.15 bid to cover.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 11/01/11

This hypothetical comes pretty close to the perfect definition of a TBTF FUBAR.

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The week started off with a $7.8b POMO by the NY Fed, providing a breather for the USD’s recent rally. Risk remained muted, with the S&P closing down marginally, but with some intraday strength.