Archive - Jun 29, 2011 - Story

Following yesterday's very disappointing 5 Year $35 billion auction by the US Treasury, Germany followed up today with its own unsubscribed bond auction failure, after Germany sold just €4.825 billion in 5 year bonds at the 2011 low yield of 2.16%. The problem - the auction remained technically undersubscribed as the €6 billion offer only received €5.445 billion in bids. Even on a sugar coated basis, the BTC was just 1.1, a plunge from the 1.9s seen recently. But such is life without the backstop of Primary Dealers who buy up everything there is, until they themselves are no longer able to flip the shell game. From Dow Jones: "The Bundesbank said all bids at the lowest price were accepted and it satisfied all the non-competitive bids at the weighted average price. The amount retained for market-tending purposes was about EUR1.175 billion, bringing the total issue size to EUR6 billion, as previously announced." Bottom line, with the pristine economy of Germany unable to sell bonds, what does that mean for the US and the rest of the insolvent "developed" world?

And no, contrary to reports, this is not an entire opposition party saying it will vote for the austerity package. It is just one person.

• GREEK OPPOSITION LAWMAKER WILL CAST VOTE FOR AUSTERITY PLAN
• GREEK OPPOSITION LAWMAKER SAYS MEDIUM-TERM PLAN IS ONLY ANSWER

Now that the impact of the first (of many) SPR release moves courtesy of an Obama administration desperately in need of political brownie points has been beyond wiped out, it is time for the IEA to leak rumors of another emergency meeting, and for our brilliant and fearless leaders to announce they are about to sell another 30 million barrels. After all there is just under 700 million barrels in the SPR now (pro forma for the first release).

The first part of the market's kneejerk reaction, wherein it goes up for no other reason than pricing in what is already a given (the alternative being of course a fast track to Albert Edwards' and Russell Napier's target of S&P 400) courtesy of the Greek vote is already taking place as futures are about to regain 1300, a 40 point move in three days (on decreasing volume naturally). This is not a surprise and the question, as we posed last night, is what happens next once the traditionally stupid market realizes that absolutely nothing is fixed and the situation is worse off than before. In the meantime, attached is a chart of the happenings in peripheral bond spread world, where after some early rejoicing, a somber mood is already coming back.

For everyone who is up early to follow the Greek austerity vote which has now been passed in principle by Greek legislators, and is formally expected to take place at 1pm Greek time, we provide a real time vote tracker (click on this early as the server fills up rather quick), as well as the usual quadruple webstream from Athens' Syntagma square.

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