Archive - Jan 17, 2011

The reverse dutch auction model for Europe's insolvent countries is dead. Earlier today Spain announced it would cancel its planned bond auction for January 20, and instead plough ahead with syndicated issuance. For those unclear with what this means, Spain is essentially saying the market pricing mechanism on its debt is too transparent and adds "volatility" and therefore the country would rather have banks underwrite the whole issue i.e., take the issuance risk on their books, thus spare Spain the embarrassment of a failed bond auction. And Spain is just the start: Portugal and Belgium have followed suit, in an action that is sure to stretch the already frayed nerves of European sovereign bond investors as this kind of last ditch effort is always taken before something is about to go "snap." From the Irish Times: "Spain's Treasury, facing a volatile market as it looks for ways to keep its debt costs under control, cancelled a bond auction planned for Thursday and said it would issue a syndicated bond over 10 years. Belgium is also seeking an opportunity to place debt with a syndicate of banks and Portugal also plans one for the first quarter, as fiscally stretched sovereign issuers elsewhere in Europe also seek to cut spiraling financing costs." And lest readers get the impression that this is purely a European development, China just announced that it is suspending its sterilization bill sales for the balance of the week. Did the European bond market suddenly die?

RANsquawk European Morning Briefing - Stocks, Bonds, FX – 17/01/11

Oh what a wonderful Too Big To Fail World...

All bullish on the western front on Friday, as a worse-than-expected 0.6% (vs 0.8% expected & prior) December retail sales figure is overshadowed by a 40bps tick up to 1.5% CPI YoY in December (vs 1.3% expected), a 50bps tick up to 0.8% IP (vs 0.5% expected), and earnings beats from JP Morgan Chase and Intel.