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As European Spreads Blow Out Post The Irish Downgrade, One Bank Continues To Use the Fed's FX Swap Line
As we earlier predicted, the S&P downgrade of Ireland has thrown all of Europe a curve ball: CDS spreads are wider across the board. Also in cash land, the Irish-Bund spread hits the widest since early May at 335 bps (+17), and its CDS leaking to 315 (+8 bps) while Portugal is slowly starting to catch up, hitting 316 bps in spread to Bunds. Portugal also auctioned off €1.3 billion in bonds maturing 2016 and 2020. The auctions were disappointing with yields continuing to leak wider:the 4.2% €0.628 bn due 2016 closed at 4.371% compared to 4.128% previously, and a 2.1 bid to cover, in line with the previous 2.0, while the 4.8% €0.672 bn due 2020 closed at 5.312% and a 1.8 bid to cover, also closing wider than the previous of 5.225%. Yet the most Yet the most underreproted, and most troubling news, continues to be that one solitary bank persists in taking advantage of the Fed's FX swap line: today it bid for $40 million in a 1.18%-fixed rate USD-based tender. This is an increase from last week's $35 million, meaning that while most banks are still finding themselves in a EUR shortage (3M Euribor was once again wider), one bank has gone completely against the grain and will not benefit from the traditional ECB liquidity boosting measures.
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Irish bitchez!
Speculators! Bitchez!
I bet that there was a phone call or other interruption in there somewhere. What I hate is that it takes me 10 minutes to recall all of the things I wanted to say/do.
Then the next interruption... ;-)
- Ned
The troubled bank is either Portugal's BCP or Germany's Postbank.
Greek spreads near 1000.
Congratulations to the competent Socialist Gvnt of Papandreou.
Congratulations to the competent Socialists of IMF.
Congratulations to the competent and expensive advisors of Papandreou.
Jail is made for Socialists.
Oh cynical me.
Funny how S&P downgraded today, when the US figures were projected to be bad...and turned out even worse. Push the Euro down and then take some profit when the US figures come in.
Let's see. California, 5th largest GDP in the World, now back to issuing IOUs to its employees. Eurozone, where, despite its problems, seems to have to have taken a more responsible course of action (subject for discussion! And they have followed the US's model as far as stress tests were concerned) and with Germany still very strong. Where would I have my money - clue, it wouldn't be in the US.
AND - today's 'headline that takes some beating' - I present, courtesy of Reuters no less, 'U.S. durable goods orders rise modestly in July'
http://www.reuters.com/article/idUSN2526884320100825
What?!
DavidC
Oooh Look,
'July durable goods orders ex-transportation tumble'
http://www.reuters.com/article/idUSTRE67N3B320100825?utm_source=feedburn...
Ye Gods.
DavidC
As the saying goes, "There are lies, damn lies and there are statistics".
"Without the volatile transportation sector, orders dropped 3.8 percent — the steepest decline since January. Businesses spent less on equipment and machines. Orders for capital goods fell 8.0 percent."
At this point, I am thinking this is not a "green shoots" kind of report....
Is this why the Eurodollar futures tanked overnight? I'm no bond or interest rate guru, but this makes the most sense.
Thanks for such a great post and the review, I am totally impressed! Keep stuff like this coming!...
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