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Irish-German 2 Year Spread Hits Lifetime High On Rumor Of Missed Irish Coupon Payment

Tyler Durden's picture





 

The 2 Year Ireland-Bund spread has just hit an all time record wide of 835 bps, following unconfirmed rumors that either Ireland or Allied Irish Bank has missed a coupon payment. Since the latter is backstopped by the former it is rather difficult to see where one ends and the other begins. And confirming that Europe can no longer use MENA or Japan as a smokescreen, Greek 10 year spread to Bunds widens 16 bps to 935 bps. Since pretty much all curves are inverted, we expect Ireland to approach Greek default risk within days. This is especially true since nothing in Europe's fiscal situation has changed and the dire funding requirements for debt rolling and deficit funding, are, well, dire.

 


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Tue, 03/22/2011 - 08:59 | Link to Comment Careless Whisper
Careless Whisper's picture

wher i come from, that would be new york, a missed payment is called a deeeeefault.

Tue, 03/22/2011 - 09:03 | Link to Comment Thorlyx
Thorlyx's picture

and that is bullish, right ?

Tue, 03/22/2011 - 09:16 | Link to Comment Sudden Debt
Sudden Debt's picture

It's bullish for Apple.

The Irish clearly have a malfunctioning planning calendar.

The Ipad has a good one, so if they all bought one, they would never forget to pay coupons anymore.

 

AND THIS MY FRIENDS, IS HOW YOU SOLVE A PROBLEM!!

 

Tue, 03/22/2011 - 09:15 | Link to Comment Sudden Debt
Sudden Debt's picture

Where I come from, a missed payment costs you a finger ;)

2 missed payments your wife

...

 

Tue, 03/22/2011 - 09:19 | Link to Comment eigenvalue
eigenvalue's picture

Then it's a good opportunity to chuck your wife for a new one! :)

Tue, 03/22/2011 - 09:25 | Link to Comment Harlequin001
Harlequin001's picture

Is that a bad thing?

Tue, 03/22/2011 - 09:48 | Link to Comment Sudden Debt
Sudden Debt's picture

not if you like to iron your clothes and do the cleaning yourself...

 

Tue, 03/22/2011 - 09:54 | Link to Comment Harlequin001
Harlequin001's picture

I could pay someone to do that...

Tue, 03/22/2011 - 13:49 | Link to Comment IQ 145
IQ 145's picture

 Well, I hope this kind of doubt causes people to sell Euros and buy dollars to participate in our glorious stock market; otherwise my short EUR/USD position may cost me a finger.

Tue, 03/22/2011 - 09:22 | Link to Comment Bob
Bob's picture

Now that was a breath of fresh air: Wankin' bankers.  Greed, greed, and fawkin' greed. 

I didn't know Michael Flatley is from Chicago!  That's one funny video. 

Tue, 03/22/2011 - 09:30 | Link to Comment X. Kurt OSis
X. Kurt OSis's picture

pog ma thoin, you fawkin wankin bankers!!!  Full of shite, the lot of them.

Tue, 03/22/2011 - 09:04 | Link to Comment kris
kris's picture

how long before they admit the emperor is naked?

Tue, 03/22/2011 - 09:05 | Link to Comment Thorlyx
Thorlyx's picture

he is only naked because his clothes were a little contamined by the fukushima shit.

Tue, 03/22/2011 - 09:27 | Link to Comment EscapeKey
EscapeKey's picture

Naked? The emperor has entered a physical short clothes position at this point in time.

Tue, 03/22/2011 - 09:04 | Link to Comment A Man without Q...
A Man without Qualities's picture

Tyler - check this out, could become a massive problem for the evil empire that is the Deutsche Bank toxic derivative sales machine...

 

http://noir.bloomberg.com/apps/news?pid=20601087&sid=a8GiLRL1B1Kw&pos=3

Tue, 03/22/2011 - 09:29 | Link to Comment Josh Randall
Josh Randall's picture

Great link - lets hope this is the beginning of a funny mad scramble by these DBags.

From the story I thought this was ironic: "Ille Papier, based in Altenstadt, Germany, sells toilet paper, paper towels and disposal systems for bathrooms..."

I thought they were talking about the Bernank and The Fed for a second

Tue, 03/22/2011 - 09:37 | Link to Comment A Man without Q...
A Man without Qualities's picture

I've actually got some history with this as I have worked on a couple of projects trying to help save companies with toxic structures sold by DB.  It is simply astonishing just how aggressive DB has been in this market and how inappropriate the products that they sell are.  I am familiar with most of the banks in this market, and DB are a different league when it comes to how badly they fuck small businesses and local governments in Europe.  As for the sales teams, I think the DB people are the scum of the earth, who live in a totally amoral vacuum.  Street corner crack dealers have more business ethics than these guys.  I know people hear thing Goldman Sachs is evil, but compared to these guys, they had a high standard of ethics.

The irony is the German government, and even the senior DB management in Frankfurt were unaware of what was going on, though they appreciated the earnings.  I hope it's a long, painful and expensive process for them.

Tue, 03/22/2011 - 10:32 | Link to Comment Josh Randall
Josh Randall's picture

++1 -- Enlightening A-Man - had a buddy that worked at DB, lets just say he wasnt there long, sounds like a soul-less place for sure

Tue, 03/22/2011 - 09:04 | Link to Comment John McCloy
John McCloy's picture

So the Euro should go up on this news in our current markets right?

Tue, 03/22/2011 - 09:26 | Link to Comment Harlequin001
Harlequin001's picture

Up or down I think we're going to get more of 'em...

Tue, 03/22/2011 - 09:06 | Link to Comment Lord Welligton
Lord Welligton's picture

"following unconfirmed rumors that either Ireland or Allied Irish Bank has missed a coupon payment"

I cannot imagine that the State would have missed a coupon payment.

And I cannot imagine that the State would allow AIB to miss a coupon.

If either has happened it is gross incompetence.

 

Tue, 03/22/2011 - 09:58 | Link to Comment RockyRacoon
RockyRacoon's picture

Perhaps a confirmed event should have occurred before the posting of the article?   Welcome to the rumor-mill.

On the other hand, it is the missed payments of small bills first that sinks the average household.  The neighbors whisper about it over the backyard fence.

Tue, 03/22/2011 - 09:05 | Link to Comment mmlevine
mmlevine's picture

Missed a coupon payment to whom?  ECB?; USA or European Banks?; Federal Reserve?

Confused.

Tue, 03/22/2011 - 09:29 | Link to Comment Harlequin001
Harlequin001's picture

Let's just hope it isn't those nice pension funds who've just been forced to bail out Allied Irish and others through some magically wonderful investment deal...

Tue, 03/22/2011 - 09:07 | Link to Comment Zina
Zina's picture

How many more days until the debt ceiling is reached in the US?

Tue, 03/22/2011 - 09:30 | Link to Comment Zina
Zina's picture
Treasury's tools to delay hitting debt limit:

http://www.reuters.com/article/2011/03/21/usa-debt-limit-idUSN0211689720...

 

Pelosi not sure Boehner has votes to raise debt limit:

http://www.washingtonpost.com/blogs/post-partisan/post/pelosi-not-sure-b...

 

If the debt ceiling is reached, THAT will be a nuclear catastrophe... 

Tue, 03/22/2011 - 09:13 | Link to Comment Quintus
Quintus's picture

So - just as the dollar is on its deathbed, waiting to drop into the 74 handle and thence rapidly lower, a 'Rumour' of a vanishingly unlikely event that just happens to carry negative connotations for the Euro (the largest weighting in the Dollar Index) is spread and bingo!  The dollar undergoes a Lazarus-like resurrection.

A missed payment (i.e. Sovereign default) would never be allowed.  Nobody in Europe would pull the plug on all their work to rescue the Euro at this point.  If AIB had no money they'd have called the Irish CB.  If the Irish CB has no money they've have called the ECB.  If the ECB had no money, they'd print it.  No matter what the Core/Peripheral country politics are in the Eurozone, this event would spell catastrophe and the Eurocrats would simply not let it happen at any cost.

This 'Rumour' is pure BS.

Tue, 03/22/2011 - 09:15 | Link to Comment Lord Welligton
Lord Welligton's picture

Agreed.

While the 2yr and 10yr have exploded it simply cannot be based on a coupon having been missed.

Tue, 03/22/2011 - 09:26 | Link to Comment Theta_Burn
Theta_Burn's picture

^ Spot on

Not much longer can these games be played.

The "end game" default distraction slowly emerging....smart bombs & missiles

Tue, 03/22/2011 - 09:29 | Link to Comment Larry Darrell
Larry Darrell's picture

Even with this rumor out there the dollar can't catch a bid

USDX @ 75.4

 

Tue, 03/22/2011 - 13:57 | Link to Comment IQ 145
IQ 145's picture

 There's always tomorrow; says one of the crazy people on the wrong side of the trade. {"Hope"} is good.

Tue, 03/22/2011 - 09:15 | Link to Comment ZackAttack
ZackAttack's picture

If they're going to default, they're negotiating with the bankers why, exactly?

Tue, 03/22/2011 - 09:17 | Link to Comment spanish inquisition
spanish inquisition's picture

It's time the Irish call on the spirit of St. Patrick to once again rid the island of snakes (bankers).

Tue, 03/22/2011 - 09:19 | Link to Comment gwar5
gwar5's picture

If PIIGS got together to default all at once things could get very interesting.

They could even form their own little union and negotiate.

The Greeks could copy Bernanke and just pay the EU back in fresh Drachmas.

Problem solved.

Tue, 03/22/2011 - 09:20 | Link to Comment John Law Lives
John Law Lives's picture

Too bad they can't just print up more of their own currency and paper over it.  They need to open their own McBernank.

Tue, 03/22/2011 - 09:34 | Link to Comment Harlequin001
Harlequin001's picture

They did, but I think Ireland can't print quite so much as the US, and Allied Irish have been a little too enthusiastic for the size of the economy.

I think this will turn out to be just a rumour...

 

Tue, 03/22/2011 - 09:22 | Link to Comment snowball777
Tue, 03/22/2011 - 09:22 | Link to Comment themosmitsos
themosmitsos's picture

Ireland playing hardball imHo

Tue, 03/22/2011 - 11:16 | Link to Comment unununium
unununium's picture

How many coupons have to be missed to trigger the CDS?  Could Ireland blow the derivatives depot and then go back to making payments?

Tue, 03/22/2011 - 09:23 | Link to Comment lsbumblebee
lsbumblebee's picture

Is this the same rumor mill that shot Gaddafi?

http://www.cnbc.com/id/41747049

Tue, 03/22/2011 - 09:25 | Link to Comment ml8ml8
ml8ml8's picture

Some grandma in Ireland called into a talk radio show there and said she didn't get her coupon payment in the mail yesterday.

Tue, 03/22/2011 - 09:27 | Link to Comment sodbuster
sodbuster's picture

This is bad news, we'll probably only be up 100 points today.

Tue, 03/22/2011 - 09:29 | Link to Comment Lord Welligton
Lord Welligton's picture
"News Headline Summary Latest update on Ireland, market talk that AIB has not missed any coupon payments, as they are not due until the end of the month "

http://ransquawk.com/headlines/127880

Tue, 03/22/2011 - 09:34 | Link to Comment Lord Welligton
Lord Welligton's picture

Something is definitely happening.

Perhaps insider information on the bank "stress" tests?

Tue, 03/22/2011 - 09:35 | Link to Comment oogs66
oogs66's picture

Finally starting to hit the radar screen again.  Anyone ever see details of EFSF2 or whatever they are calling their ability to buy bonds?  CDS also leaking, it had hung in better than cash for a couple days so strikes me the shorts/hedgers are getting excited/nervous again and will try to push it wider.  Really looking for details of the revised EFSF but I suspect the market will be underwhelmed, much to the chagrine of the politicians (in Germany and France as those in Ireland and Greece no longer seem to care to play kick the can).

Tue, 03/22/2011 - 09:38 | Link to Comment Wynn
Wynn's picture

Is there a no-fly zone over Ireland yet?

Tue, 03/22/2011 - 09:39 | Link to Comment americanspirit
americanspirit's picture

I wonder how long before the folks in Ireland decide its time to put the banks under their own very special kind of stress test?

Tue, 03/22/2011 - 09:43 | Link to Comment Lord Welligton
Lord Welligton's picture

Would water-boarding the Directors count as stress?

Tue, 03/22/2011 - 10:06 | Link to Comment Atomizer
Atomizer's picture

"I'll gladly pay you Tuesday for a hamburger today "

Tue, 03/22/2011 - 10:09 | Link to Comment TruthInSunshine
TruthInSunshine's picture

The U.S. should just default.

We can't pay the shit off, and why not screw the Federal Reserve into oblivion.

Japan, England, Ireland, Spain, Portugal, Italy, Greece - they can't pay their debt.

It's not possible.

Why even delay it?

Hit the Staples 'easy button,' and get the pain over with, sooner rather than later.

Maybe make an exception for sovereign citizens holding their own nation's notes, which in the U.S. would be on the order of what?....20%?

Tue, 03/22/2011 - 10:16 | Link to Comment snowball777
snowball777's picture

http://www.csmonitor.com/USA/Politics/DC-Decoder/2011/0204/National-debt...

US individuals: 12%

Fedsuary: 9%

China: 9.8%

Japan: 9.6%

So...how do you 'screw' the retirement and MM funds holding said debt, without screwing the citizens invested in same?

Tue, 03/22/2011 - 10:33 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Tell them that risk is a bitch, bitchez.

Plead temprary insanity as a nation during the reign of ChairSatan Bernankicide.

Tue, 03/22/2011 - 10:36 | Link to Comment MachoMan
MachoMan's picture

The FED is going to be set up as a bad bank and default as an attempt to appease the masses. 

I think the better question is why bother defaulting now when we can keep the charade going?  It's certain we will eventually default (whether through outright default or devaluation), so why shoot ourselves now?  The other issue is, what happens if prolonging ourselves in the status quo allows us to pick up firesale prices from deleveraging sovereigns and prop ourselves up even longer?  Like dead wood on the forrest floor to a forrest fire...

I don't think this issue is that simple.

Tue, 03/22/2011 - 10:45 | Link to Comment TruthInSunshine
TruthInSunshine's picture

So a good analogy is a real estate developer friend of mine who defaulted on over 700,000 dollars of unsecired credit card debt, of which about 500,000 was run up between the time he knew he was certain to ultimately file for BK and that he actually did?

 

Tue, 03/22/2011 - 12:13 | Link to Comment MachoMan
MachoMan's picture

Yes.

Pre-TARP, if we want to be as incredibly optimistic as possible about potentialities, then arguably we could have turtled up and tried to make a go at austerity.  The problem is, we have closed that door in the meantime through our printing efforts.  In other words, at the present juncture, we are certain to descend into hyperinflationary depression given the inevitability of outright default or devaluation.  Presuming this is correct, why end the charade now?  I think one could even make the argument to dump everything we have into infrastructure spending and flip the bird to our creditors.

Given this outcome is painfully obvious to all involved, we are presently left with no choice but to attempt rounds of austerity and stimulus, hoping to ratchet down liabilities while keeping concerns range bound (panic/faith in the currency range bound).  The low hanging austerity fruit will be picked first of course...  otherwise, I fear we will be on a sprint to a commodity moonshot.  (given marginal stimulative efforts do nothing but increase commodity prices)

At any rate, given the wealth gap and inability to fruitfully stimulate the economy, the FED's useful lifespan is nearing an end.  What happens on the backside is anyone's guess...  whether we're capable of continuing the dollar...  a full or partial default...  a firesale to related parties...  who knows.  But, politically speaking, I just see the FED as a very large buffer between the pitchforks and the principal actors in the fraud and I think it will be jetissoned to keep the pitckforks at bay, eventually.  [much the same way debtors blame banks for loaning them the money to buy houses].   

Tue, 03/22/2011 - 10:26 | Link to Comment 99er
Tue, 03/22/2011 - 11:11 | Link to Comment boiltherich
boiltherich's picture

Markets trade mostly on rumor, if price were discovered via textbook capitalist tools like ROI, cost basis, or supply and demand, Wall Street would be a pretty sleepy place, volume would collapse and fees would crater.  This might well be a baseless rumor, if it is not my guess is that it is the new Irish government taking a shot across the bow of the SMS Merkel.  Want to send a message?  Try skipping a coupon payment for a day or two, after your point is made you can always say later error was involved, if it works you get restructured into lower interest rates from an otherwise intractable lender, if it doesn't you had nothing to lose because the current deal was bankrupting you anyway.  If this is the case then the ploy is having what I think is a far larger impact than Mr. Kenny had envisaged.  Eurobond markets are in turmoil this morning with predictions of contagion sending yields to the moon.

 

Tue, 03/22/2011 - 11:21 | Link to Comment oogs66
oogs66's picture

Whatever is going on out there, its gatthering some momentum.  SovX is now 5 wider from an hour ago (177) and looks like irish and greek 10 year bonds are also out another 10 bps.  Stocks are relatively oblivious.

Tue, 03/22/2011 - 12:34 | Link to Comment Jack Donaghy
Jack Donaghy's picture

Not true but there are some interesting goings on according to FT Alphaville

http://ftalphaville.ft.com/blog/2011/03/22/522936/allied-irish-coupons-still-alive/

Tue, 03/22/2011 - 14:05 | Link to Comment jkruffin
jkruffin's picture

Yesterday, Portugal flat out just said they will not push any more austerity on their people, and they will just default. 

I can see the PPIGS lining up any day now to declare default...

That is why I am short the EURO like a big dog....

Goldman is not going to make their perfect trading record this year, guaranteed.

Tue, 03/22/2011 - 17:36 | Link to Comment Buck Johnson
Buck Johnson's picture

They defaulted pure and simple.

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