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Failed Polish Bond Auction Raises Serious Questions For Emerging Markets
In its first bond auction since announcing its budget deficit was set to double in 2010 (talking a massive $20 billion here, nothing as puny as $9 trillion over the next 10 years), the Polish government sold only half of the PLN2 billion of the 5.75% bonds due 2011 it was hoping to offload to investors to plug the hole. It appears, unlike Tim Geithner, Polish Finance Minister Jacek Rostowski does not have Wen Jiabao on speed dial. Then again, after they have taken over America, who knows where Chinese interests will look next: that Bison grass vodka sure is a strategic asset.
Subsequent to the auction, BNP had some less than encouraging words for holders of Polish bonds:
“This is a direct consequence of a very dangerous fiscal
outlook presented in the 2010 budget draft. We recommend selling Polish bonds
across the curve.”
This merely reinforces Zero Hedge's view of the U.S. exemption from economic reality: after all, like any aggressive distressed bondholder, China is merely preparing for the inevitable debt-for-equity swap. If there are no other bidders (aside from the debtor itself of course), so much the better.
Unfortunately for Poland, it does not have a comparable exemption. The result:
The Polish zloty weakened 1.2 percent to 4.1635 per euro as
of 11:22 a.m. in Warsaw, the most since Sept. 1. Polish bonds
fell, pushing the yield on the five-year note four basis points
higher to 5.79 percent and the yield on debt maturing in October
2019 up six basis points to 6.23 percent, according to PKO Bank
Polski SA in Warsaw. Bond yields move inversely to prices.
Poland is definitely not out of the woods: the country is planning on selling another PLN2 billion on September 23. Perhaps it is time for the IMF to issue another rosy report about how everything is peachy throughout its protectorate.
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how this is not getting more attention is beyond me. Poland, i believe, is considered the most stable of all of the F'd nations over there. Maybe if they give the FDIC a call they could get them to back the debt....?
This makes the USA better? US Treasury actions have lately been met with near 50% indirect bids.
The Poles need to discover the joys of QE and quit worrying.
QE American style only works when you are the world reserve currency and everyone else continues to drink the kool-aid, either because they must or they want to.
Perfect kernel of truth... "China is merely preparing for the inevitable debt-for-equity swap. If there are no other bidders (aside from the debtor itself of course), so much the better."
There is also a crazy constitutional crisis in the Czech Republic. Yup, the country whose government failed during the 1/2 year as a head of EU. After the govt fell, congress made an constitution amendment saying "There will be new elections in October." Today, the constitutional court said "No way! What are you gonna do next time, say the elections will be delayed by 5 more years?" Today. Massive rage is ensured to happen, since the issue of constitutional court declaring an constitutional ammendment unconstitutional is as Catch 22 as it gets. Are they allowed to do it? Politicians dont think so. Meanwhile, the temporary bureaucratic govt has yet to pass budget for this year and it is projected to put them in the hole ~ $15 billion which is a lot considering the country is 4 times smaller thaan Poland.
If you were China, if you had all the money in the world (more or less), if you knew you had the US by the balls, and you decided to trade that cash/debt for something of value then what would you buy and in what order would you buy it?
This would make a great topic for an essay contest, BTW. It would get the old thought juices flowing.
I think they would first purchase non-controversial assets such as those that China can use, that have global appeal and intrinsic value. Commodities are a no brainer; not stockpiling, rather, the entire production facility or mine. Then you need a means to process and transport the goods. Then maybe a vanity asset, such as Disney. And of course, access to innovative technology is key; they would need to buy a lot of companies that make it.
Would this make the USA a vassal state of China once the buying went into high gear? I wonder if the CIA has noticed the vulnerability the US has to masters of finance such as China? Could the attention being paid to Afghanistan be partially a distraction so that people don't think much about the national weakness caused by the US being a welfare state?
"what would you buy and in what order would you buy it?"
A. Long-term oil supply contracts (paid for in CNY)
B. Gold, silver, and other industrial metals, and the mines that produce them
C. Taiwan, the Spratlys, and influence over Australia
Taking the longer view, it may well be worth the hit they'll take when their dollar-denominated treasury/agency holdings are devalued.
http://dailyhype.blogspot.com/search/label/financehype
I am feeling like a Zubrowka night, its nearly the weekend!
I don't get it ... why is GE down in big volume 1.92 % ! to 14.59 if it is going to be very soon at 18.
What a beautiful entry point they are giving me.... thanks for the tip JPM, GS!
I'll take some of that vodka over treasuries any day.
at 5.75% I wouldn't touch these bonds with 10 foot pole (no pun intended).
greetings from Poland !
Zubrowka is OK - this is fact
;-)
be carefull bacause sometimes our bisons piss on this grass that is inside bottle
:-)
Bardzo smaczna z sokem jablkowym!
oj tak !
:-)
Yeah, it does kind of need the apple juice; it's a bit too herbal for me without it. But good cultural catch, Tyler.
oj tak tak !!!
:-)
That just makes the vodka stronger right?
Strange. Poland is doing fine economically compared to others. However, they seem to have a debt servicing issue if I read that right:
http://www.mg.gov.pl/NR/rdonlyres/79EAA081-13A4-4FF9-BDBA-49BB45A188A2/5...
in any case Europe is better off now than the US. look at the Europe Q2 GDP, look at their stock markets, and look at the EUR. now compare the amount of stimulus to the US.
it shows that Bernanke, Geithner and all US administration are a bunch of imbeciles.
erroneous. Europe would be no where without our massive interventions. Their GDP in GER and FRA was entirely government induced - you also fail to mention the PIIGS. Their banks are far more leveraged than ours and they are massively exposed to toxic baltics and EM in general. EUR rising is anethema to all of them.
GDP - #'s manipulated
Stock Market - manipulated
Forex Rates - manipulated by EUR/YEN carry trade
"Bernanke, Geithner and all US administration are a bunch of imbeciles" - spot on
Europe, excluding Russia and Norway (take a look at the last page of a recent issue of the Economist if you dont believe me on Norway) is definately screwed too. Who is worse off is almost irrelevant at the levels of screwdness we're looking at now.
Either the IMF is sweating bullets right now or rubbing their hands together saying "eeexcellentt, another debtor slave country." It seems Poland may soon need to draw upon their credit line:
http://www.imf.org/external/np/sec/pr/2009/pr09153.htm
Chavez recognizes two Georgian breakaway republics:
http://www.guardian.co.uk/world/2009/sep/10/chavez-georgian-republics
This post has too many tags.
?Yak zhe mosh? LOL
To be honest, Poland is not in as deep water as the media wants them to believe. Polish banks are don't have as much of a burden of "risky loans" to their citizens. It's very tough to obtain a loan in Poland, and the people that do have to show that they are well capitlized.
Sure things are not so rosy in Poland as China, but hey, let the media portray that their are problems there. I'll still be investing in Polish real estate/equity markets for life.
Keep in mind interest rates there for a 12mth CD are 5-6% avg at most banks/credit unions. That in combination with appreciating z?oty/dollar, it's a no brainer.
This raises an interesting, but politically incorrect question:
How many Poles does it take to screw up a bond auction?
The sky is the limit for central europe. educated, cultured people who want to work. The Germans are already considering WhiteRussia into the EU. that would be a massive economic powerhouse the world has never seen. I assume the US new york banksters will continue to destabilize central europe via Switzerland,etc. The US will do everything possible to destabilize europe and prevent coordination between WeissRussia and western europe for a massive EU. Just imagine if 20 planes struck manhattan and not merely 2; the worlds financial system would be sound and world prosperity would exist. Oh well.