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As If On Cue After My Step By Step Illustration Of A Spanish Default, Spanish Yields Climb at Auction As Pressure Continues
From CNBC: Spanish Yields Climb at Auction, Pressure Continues
Spain was forced to pay a hefty
premium at its final bond auction of the year on Thursday, in a key
test of investor appetite for euro zone peripheral debt a day after Moody’s said it may cut the country’s rating.
The Spanish Treasury raised 2.4
billion euros ($3.20 billion), within the targeted range of 2-3 billion
euros but disappointing some analyst who expected more debt to be
sold.
Average yields on the two issues rose between 80 and 140 basis points from previous auctions of the same maturities.
That was a touch lower than what was
expected according to trade in the secondary market ahead of the
auction but analysts said the price paid by the Spanish government
showed it remained at real risk of having to seek outside help next
year.
“In the short term this should
reduce pressure on the Spanish market, but I think when one looks at
the bigger picture and considers the small amount sold, with low
bid-covers, yet at a high yield, then it seems clear that peripheral
markets remain under pressure and in need of support from
policymakers,” said Peter Chatwell, rate strategist at Credit Agricole
in London.
Repeat “analysts said the price paid by the Spanish
government showed it remained at real risk of having to seek outside
help next year” – This was clearly illustrated and anticipated in Will Spain Default? The Answer Is Not Hard To Determine If You Take An Objective Look At The Numbers And Recent History! December 13th, 2010, to wit:
Spain is unique among the
aforementioned group in that the amount of capital necessary to bail
out this country is likely beyond the ken of the EU/IMF, and will
likely assure a contagion effect. While it is true that Spain is not as
indebted as the smaller periphery countries from a proportionate
perspective, it is likely that it is not on a sustainable path and the
efforts to make said path sustainable will may require
restructuring/default, particularly if the smaller periphery states
default. Of course, Spain doesn’t necessarily see it his way, at least
according to the mainstream media. From CNBC:
Spain Not Next in Line for EU Bailout: Finance Minister
Spain will not be next in line for a
rescue package from Europe but a common economic policy is needed to
support a single currency, Spanish Economy Minister Elena Salgado
told BBC Radio on Friday.
This is a current snapshot of Spain as it stands now (excerpted from our subscription report
Spain public finances projections_033010 and the online restructuring model - The Spain Sovereign Debt Haircut Analysis for Professional Subscribers):
v As it stands now, the government
expects to increase its debt from 55.2% of GDP in 2009 to 74.3% in
2012. In absolute terms, the government debt is expected to grow from
€580.4 billion in 2009 to €848.3 billion in 2012. However, we expect
the debt to increase much more owing to a shortfall in government’s
targeted fiscal consolidation, primarily on account of lower-than
expected economic recovery.
Note that the Spanish government has been very optimistic in their
projections, and that optimism fails (of course) to take into
consideration the considerably higher debt service born from punitive
market rates.
As can be seen, Spain is currently worse off in terms of financing
premiums, than every other sizable nation in the Euro region that has
not been bailed out already. 2011 is a big refinancing and rollover year
for Spain. What will they do? We all know what they will do: Either
pre-emptively restructure, default, or receive IMF/EU aid then
restructure or default. There is a small possibility that they will
attempt to drag this along for some time, hobbling along the way, but as
exemplified by Iceland, getting it out of the way is much more
expedient.
Even if Spain were to receive assistance in the form of a bailout
from the IMF/EU, the problem is simply kicked down the road, and not
rectified. Again, the year 2013 is the magic number and the day of
reckoning.
The big issue is that the EU cannot afford any defaults or
restructurings. Although their banks passed the stress test farce
(including the Irish banks which passed right before they had to be
bailed out), the tests did not include sovereign debt. This is what
makes the tests a farce, and this is why any restructuring or default
will literally render the entire EU banking system insolvent on its face
(which it already is, its just that default will make it official).
Next up, we will explore the contagion effects abound in Europe. Subscribers please review:
- Sovereign Contagion Model – Retail (961.43 kB 2010-05-04 12:32:46)
- Sovereign Contagion Model – Pro & Institutional
See our subscription report Spain public finances projections_033010 and the online restructuring model - The Spain Sovereign Debt Haircut Analysis for Professional Subscribers), as well as the inevitability of a default or restructuring of the debt of:
- Ireland (Here’s Something That You Will Not Find Elsewhere – Proof That Ireland Will Have To Default…),
- Portugal (The Truth Behind Portugal’s Inevitable Default – Arithmetic Evidence Available Only Through BoomBustBlog),
- and Greece (What is the Most Likely Scenario in the Greek Debt Fiasco? Restructuring Via Extension of Maturity Dates),
The entire Pan-European Sovereign Debt Crisis series can be found here.
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Who woulda thunk that the phrase "the non-bailed out PIIGS group" would be of pressing concern....totally boss, Reggie. When will these armies of can-kickers at all levels, foreign and domestic, simply mark to market, consolidate and let us all live again?
This is quintessential petit bourgeois thinking, which makes it impossible to understand what is going on. There is no "can-kicking" going on. Get a grip. It is flat out Mellonesque liquidation.
Oh and by the way. Don't like the amount of borrowing being done? Work proceeding right now on faux borrowing. Where people like Reggie can't find out what's going on and it seems like governments are borrowing less. The looting effect is the same, but petit bourgeois types like Reggie scratch their heads and say, "Gee, they're borrowing less."
In short, there's a way around EVERYTHING Reggie doesn't like--and our Mellonesque liquidators will find it.
And to which self-assigned Marxist class element do you belong, pray tell? A simple prole perhaps? Or a capitalist schwinehund?
Folks around here do know what's going on, David Ricardo. For my part, it suits me to offer up the No Bond Haircuts policy as a keystone example of the current path of destruction. If you're just saying that printing begets poverty, well clap clap clap. There are plenty of facets to be examined and no need to show off infantilism in the process.
Life is the next step in the process of death. The truth of the matter are that higher yields advance Mellonesque liquidation. If they are a signal of anything, they are a signal for more looting via various kinds of monetization, some of which we won't even know about.
We're well on our way to exactly the figure I mentioned earlier: $70 trillion of QE. People laughed at that figure 2 months ago. Are they laughing at it now? Don't think so!
>Mellonesque liquidation
New term to me, what's it mean?
Does it mean the market healing itself and wiping away malinvestments because of the government kindly pulling away artificial supports and encumbrances?
Or does it mean the market getting worse due to distortions caused by panicked looting by government scumbags?
Or something else?
When power ceases to regard the society as a profit center, and begins to look at it as a loss center, Mellonesque liquidation says that government is withdrawn from society. That means looting. It does not mean government gets
1. smaller
2. less intrusive
3. spends less.
The fact of the matter is that, with BLS unemployment among the Bachelor's class at only 5.1% (or 10.2% underemployment), there is still PLENTY of money to loot.
How to loot it? The problem with most commentators is
1. they pay no attention to middle class employment; and
2. they consistently underestimate the sophistication of Mellonesque liquidation and the means at its disposal.
It turns out that virtually any financial or economic expression can be used to advance the cause of government withdrawing from society, because remember, the goal is to loot EVERYTHING. Sometimes that is advanced by giving the middle class some more money, drawing them out of their holes, making them spend. Same with expanding unemployment. But the most obvious ones are:
1. cartelization
2. monetization
3. induced supply chain deterioration (who's paying any attention to the supply chain? no one?!?)
But there are huge number of private agreements among the various actors to carry out Mellonesque liquidation. The main effect is that everything looks fine to the middle class. But then one day, they wake up unemployed and the financial system has imploded. There's nothing left to steal.
Too bad the War interrupted the Mellonesque liquidation FDR was carrying out. He's touted as a welfare state guy. Actually, he was carrying out Mellonesque liquidation up until the War intervened (and people didn't like it: look what happened to the Democrats in 1938!).
So we never got the full implementation of Mellonesque liquidation. This time I think we will, because there is no will in the middle class to preserving the society.
Spain has to be sacrificed to save falling dollar and rising 30 years interest rating. It's man-made event. Ireland show is a complete failure, medias had to borrow pictures from UK's riots.
Do you foresee interest in buying 30yr bonds?
What's your rationale?
One gets the feeling that either way, default or no, increased indebtedness is what the Euro-elites have always had in mind. What better way to centralize further the EU state and reduce nations to satrapies of Brussels Rockefeller & Co.?
This is the disaster we put off last summer. Next will be Portugal, then Italy, and then Germany will create some sort of confrontation. And Uncle Ben will step in!
Who is this "we" you speak of Kemo Sabe?
Probably referring to those Mellonesque assets in the avatar.
Who woulda thunk that the phrase "the non-bailed out PIIGS group" would be of pressing concern....totally boss, Reggie. When will these armies of can-kickers at all levels, foreign and domestic, simply mark to market, consolidate and let us all live again?
I bet many of them are simply helpless addicts or sociopaths, wondering why in God's name they are allowed to continue these debasements of common sense that simply amount to looting old folk and babies to feed their bonuses......not to mention what's left of the middle class and small business....no better than maggots, while the governments eat alongside.
reg ( i told ya so ) middleton has done it again. spot on reg.
merry Christmas and a happy and prosperous new year to you and yours.
europe will collapse soon. worse than bankruptcy. the residents are on their way to mass starvation.
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