Irish CDS Tightens 20 bps After Successful Bond Auctions

Irish CDS, which recently was trading wide of 300, tightened materially after the country, most likely with a very direct ECB intervention, managed to place two €0.75 billion auctions, the first a 4% due 1/15/2014, and the second: 5% due 10/18/2020. The Bid To Cover on the first was 5.4, compared to a BTC of 3.1 at the last auction held in May, explained simply by the surge in the rate from 3.11% to 3.627%. The 2020, however, saw the BTC drop from 3.0 to 2.4 as the yield dropped from 5.537% to 5.386%. In other words, the ECB overbid for the near maturity, and likely just put in for a token amount. And for some odd reason, CDS traders see this latest central bank intervention to extend and pretend as a favorable development, and have decided to run away from Irish risk for the time being. The question of how long the ECB can continue this charade is relevant: after all the Fed has just one country to deal with. And continuing with Ireland, the country's central bank stated that the net cost of Anglo-Irish to the government may be €22-25 billion, even as it cleared up hypocritically that capital raising via taxing banks' excessive reliance on short-term borrowings would be preferable. Of course, the central bank should keep its mouth shut, and be happy that the ECB will continue to support any part of the curve, as in its absence the country would be long insolvent.

Comments

[dan22]

The Euro Crisis and the Coming Euro Collapse Act II- Time to Check How Austerity Is Going

[snowball777]

Would YOU short in the face of an obviously willing-to-monetize ECB?

Well-played, Can't-Do-Shit traders, well-played.

[THE DORK OF CORK]

Things are not so bad - watching the World at War narrated by Laurence Oliver - the episode deals with death not debt.

[Amsterdammer]

The head of the Irish Central Bank is a case of his own

and was pesting publicly to A.E.P in the

Telegraph last week that the Anglo-Irish 'failure'

was costing them arounf 16% of GDP

'Ireland: A recession of the banks, by the banks,

for the banks' frontrunning Europe...

http://fistfulofeuros.net/afoe/economics-country-briefings/ireland-a-rec...

[M.B. Drapier]

Returning to the chicken-match model (or maybe the sinking-bagful-of-angry-weasels model): how long does the ECB want to continue this? Will it lose most of its interest in propping up the PIreGS once the sovereign-restructuring circus finally makes it into town? Or maybe the Double-Secret Restructuring Mechanism is only meant for Spain (and maybe Portugal) while Ireland is judged small and well-behaved enough to keep on supporting?

[THE DORK OF CORK]

Now that would be funny - moral hazard squared.

The remaining Irish peasant stock would have to emigrate to Iberia - but perhaps the southwestern ports of Ireland (Dingle) can become smuggling towns again - running the gauntlet against the Imperial European Navy to smuggle in Wine and Brandy in exchange for Beef and Butter.

But seriously - should any agreement between Germany and Ireland involve their capacity as sovereign states (I know that's funny) and not some sort of Brussels banquet agreement where the true beneficiaries are hard to see.

For example I imagine we could give up our corporate tax system in exchange for a write off of our private debts to the landesbanks.

The French may be more amiable if we bought a nuclear reactor or two with our sov debt.

If Brussels were directly involved they would want more centralised power again.

[Herry12]

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