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Here's Why Italy's CDS Are The Biggest Risk For The Eurozone
Much hollow rhetoric has been uttered about the vast existential threat presented by Greek CDS. As we have reported, Greek CDS is the least of Europe's problems. When it comes to the stability of the European dominoes, it is and has always been about Italy, which is not only the second worst country in Europe after Greece on a debt/GDP basis, and also the country with the largest amount of nominal debt, but more importantly has the largest amount of net CDS outstanding. All this is summarized on the Bloomberg chart below.
What the market is most confused by is that Spain, which everyone thought would be the next to fall after Portugal, yet which in the Cajas has the same GSE-type structure that provides a natural buffer to a housing system that is getting destroyed by its own Option ARM implosion (unlike the US' Liebor, Euribor is at 1.593% and making adjustable mortgages quite painful), the bond vigilantes decided to go straight to the gateway to Europe's core. Italy. So ignore whatever the PBoC is doing with the EURUSD, and Brian Sack is telegraphing with his ES ramp into the close: the truth is Italy is on the verge, and with all communicating vessels, the pain is only just beginning as Europe will find out very soon: as the chart below shows, there is a doozy of Treasury issuance about to be unleashed by the Italian Treasury.
Bottom line: the Italian CDS is not so much an aggregator of risk, as a beacon of where investors think risk will emanate from next. Although, to be fully objective, the biggest surge in recent months in net notional has not been at Italy, nor Spain, nor any of the other PIIGS, but.. France.
There is, however, one country that is missing from the Y/Y surge comparison. The United States of America.
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So with France in the mix, do we get F-PIIGS...
...and with the US, do we get FU-PIIGS?
bail them bitchez out! we need to rally on!
Nice to see some focus (someone send the rating agencies a note on the subject).
It really helps.
As does objectivity.
Speaking of which, have we seen any ZH mention of the extremely light volume on today's melt "down"?
No. I asked about this earlier as well. The slow pace of trading was downright suspicious today. While it may just be coincidental or a problem with my rig I'll also point this out: the most basic (and free) tools are not reporting today's volume right now. This may change momentarily, but Stockcharts.com shows no volume bar for $spx. Google Finance shows yesterday's volume for .inx. Yahoo Finance will show that volume was bottomed out for the whole day except a spike right at the open but will not show the aggregate volume for the day. Like I said, this may just be a temporary something-or-other and I don't want to get my tinfoil hat out just yet; but, it's annoying the hell out of me since I watched the volume all day and it didn't even come close to being even nearly almost 1 billion shares traded for the S&P. Furthermore, JPM and C (I'm sure there may be others that I didn't catch as well) had volume that was laughably below their averages.
Someone, please say something about this. Tyler, please tell me what happened today. I don't have the tools to investigate, but I do have the eyes to observe it. It just didn't feel right. Mr. Tyler Durden, I wait for word about this mystery. Please illuminate. I am inthe dark.
OK, let me retract that partially. Stockcharts now has volume up there, but it is significantly higher than what they were showing throughout the market day. Apparently, Google Finance and Stockcharts had the same glitchy info. Volume was not actually that bad for the S&P.
Apologies.
In Hedge Fund terms Fuck the PIIG's.
you left out UK...so it is FUUK-PIIGS
You left out US...so it is FUUK-US-PIIGS.
If you add China and Kameroon as well, you know what is going to happen to Europe :-)
Berlusconi attack on Tremonti is the tip of the iceberg...
w/ tremonti's heart condition thats a dangerous game he is playing ... a smart tax guy would call it quit ...
At some point, isn't some nation going to just call the whole slow-motion-train-wreck off and go postal via invasion or carpet bombing?
If they are led by geniuses such as yourself that, sir, is indeed a possibility.
Does each country get their respective "15 minutes" or do the dominoes just start falling?
They gridlock internally over how to allocate dwindling resources...
and then like a top that's lost its spin they fall over.
"the bond vigilantes decided to go straight to the gateway to Europe's core."
The allies tried that. It didn't work out so well...
"the biggest surge in recent months in net notional has not been at Italy, nor Spain, nor any of the other PIIGS, but.. France."
Yeah, that route worked out a bit better...just sayin...
+1
Euro-peons, don't hate on slant eyed Chinese for now they own you.
its like racism
you mean it's.
No-one owns Europe... you still do get it do you...
A little background music while your reading article.
Johnny Cash - Ring of fire
http://www.youtube.com/watch?v=0lhf9U5Wf3Q&feature=related
But but...can't we lie our way out of this one too?
Say what you will, but we got some of the world's great liars assembled in the ECB and the Fed these days. Hehe even the politicians get baffled!
So with the combined lying power of the ECB, Fed, IMF, Euro and US politicians, you would think we could just get through another debt crisis one more time
Yes! What is economy: the cooperation of individuals toward a lie: a goal in a future that might exist...
Good liars vs trembling lips...
Yes! But the success of the economy depends on the ability of the liars to stay one step ahead of the truth and the skeptics. So we need really, really olympic level liars to have a great economy. We're in trouble now because these guys started believing their own lies in 2005-2008. "The fundamentals of our economy are sound". And Bernanke thought he could have prevented the Great Depression from his computer, so he got overconfident. Now they realize they have to start lying really well again
vague, nonspecific, disorganized
vague and nonspecific are near synonyms. redundant.
Or just billions upon billions of really stupid sheeple.
Who were the underwriters on the Italian CDS? I'm actually asking, not being coy. Surely the US banks have some exposure here,no? Tyler?
It's almost impossible to say without some entity making an annoucement that they are holding the bag. That will never happen. CDS's can be created and then sold to other entities so who knows who has what until they are cleared.
The president would like to order a pepperoni and mushroom cloud. ;) (My dad worked at Teledyne back in the day)
It's hard to keep sinking ships afloat
Awwwww.
lol
Not when they're already stranded.
Still they'll sink in all the quicksand :)
I wonder how much of the France CDS increase has to do with failing to conquer Libya?
Look, US consumers, if you promise to max out all your credit cards at the mall this weekend, then we promise you we'll take care of the banking booboos
this is huge!! western civilzation started in italy & its end begins in italy
someone said that about greece last week
anyhow it's so euro centric
I always thought Italians had low private debt levels !
Whats the total private debt in Italy ?
It's true:
http://translate.google.it/translate?hl=it&sl=it&tl=en&u=http%3A%2F%2Fbl...
Doesn't that just mean they have an extra pound of flesh to donate to the cause?
also they say their central bank holds a fair slug of gold. http://en.wikipedia.org/wiki/Gold_reserve
2451 Ton = $110,306,470,680.00
Huge. Like their love.
its tough to engineer cross collateral loans in Bulgarian
I want to give a big round of applause to the Markit team that posts their Peripheral Sovereign CDS Pricing table on FT Alphaville! They are clearly doing their part by not updating the spreads all day today. I wonder if they got a call from Timmy to just stale it and call it an early weekend!!!
Bernanke will print all that, no worry.
No UK?
UK currency isn't a part of the Euro.
that and a gold chain will get you a date with my sister, Mr Crawford
Italy is not Greece or Spain. The main problem with debt is whether it is sustainable or not.
Currently, the Italian debt is under control and the last maneuver provides a return of deficits to zero in 2014.
FMI only few week ago, before Italy decided to take further action, indicated:
" For Italy, the Institute of Washington , after 4.5% in 2010, estimated a deficit-GDP to 4.1% in 2011 (0.2% more 'than the estimates in April) and 3 , 2% in 2012 (0.3% in more '). The debt , however, after having stood at 119% of GDP in 2010, should go to 120.6% of GDP this year (0.3% more 'compared to April) and 120.3% in 2012 (in this case, 0.3% more 'than the previous estimate)."
Last but not least, Italian debt has an average duration of 5 years and more so there is not a liquidity problem in the short run....
what are we talking about? this is just WRONG speculation...
pay no attention .... just scare tactics ... buy, buy, buy...
Yeah show me how they're going to grow out of this debt.
Buy wtf do i know. Like the other guy said - buy buy buy!
A question for participants in the CDS market. Aren't they marked to market every day (or week) and the funds to make up the change wired to the party that is "winning" on the trade? Isn't this why bk's don't result in massive losses to the CDS issuer? Because the money has already traded hands?
Some clarification would be helpful.
Don't know until the phone rings. After that it's either "it's all good" or "that's our bank now."
Big moves between marks and settlement require counterparties to settle up, and they have to raise cash. Or a name jumps to default between mark and settlement. Both put the party on the short side in a pinch.
France - absolutely. Their banks are up to their necks, as much as the Germans.
I still laugh recalling a programme where Christine Legarde criticised Eric Cantona (and his draw out your cash campaign), by saying he should stick to football and leave finance to tyhose who know what they're doing. She's managed to screw France and now she's head of the IMF, how' scary is that. Europe is so fucked. And that includes us here in the UK.
This afternoon I found myself musing about perhaps a real possibility. Default is occurrent or nearly occurrent in Iceland, Ireland, Lithuania, Greece, Spain, Portugal, and now perhaps Italy. Loans with interest have been issued to those currently deemed the worst off, said loans absurdly coming with interest. After all, if an economy is in serious trouble, adding interest doesn't make matters better, it makes matters worse.
In any case, there seems real reason to believe it inevitable all of these economies will declare default. What struck me this afternoon, however, is it making sense for all to do this in coordination at the same time. Certainly the threat of doing so would shake the EU in particular, and the global economic powers in general. Doing so, it would quite likely motivate them to pump money into these economies, sans interest. Alternatively, if all declared bankruptcy together, there would be nothing to stop the world economy from collapsing.
Most importantly, investment companies would fail in enormous numbers. Interestingly, this might be a damn good thing in the long run. A day or two ago, I asked a historian I know if there were any accepted explanation of the cause of the Great Depression. He indicated, as I had thought, "no." Of the attempts to explain it, the most plausible was European investment companies overextending, until default, sucking U.S. investment companies down. If this is so, the very idea of investment companies need be seriously reconsidered.
It is clear that the Economic
theories in place are outdated, just look at the unemployment report, 99.99% of
professional economist were completely wrong and are all wearing their rose coloured
glasses rather be realistic. The US economy is in huge trouble, that’s a fact.
Check out the latest from the Capital Research Institute (CRI): Creative Destruction – A New Economic Order
www.capitalresearchinstitute.org
Poorly written, even if the intentions behind the piece are valid.
We will stop to issue in the future "BTP 10Y" but only "BBB 10Y" (Bunga Bunga Bonds)
It's only sex;) Everybody lies about it. It's not like it was rape. The rape-rape kind of course;)
It's only sex;) Everybody lies about it. It's not like it was rape. The rape-rape kind of course;)
It's only sex;) Everybody lies about it. It's not like it was rape. The rape-rape kind of course;)
CDS for STDs?
http://www.marketoracle.co.uk/Article29092.html
EU will save every European Bank....
http://uk.reuters.com/article/2011/07/08/uk-eu-banks-stresstests-idUKTRE...
Yep no one is going to default and Goldman sachs will profit from all this CDS.
unless the EU creates their own rating agency and issue their own CDS.
In 2009, Mr Berlusconi estimated that over 20 years he had made 2,500 court appearances in 106 trials, at a legal cost of 200m euros.
http://www.bbc.co.uk/news/world-europe-14091890
$797 million fine & he's confirmed that he won't be running in 2013, so it is game on (as strongly suspected by most people, even the Economist called it). Just remember Bettino Craxi... The same old game of L&R / B&R that has no difference.
GSE, what does it stand for?