It's Confirmed: ECB "Forced" To Buy Portuguese Bonds
Earlier today we speculated that due to central planning goldilocks breaking down, and the corresponding downtick in the EURUSD, the minions of the ECB's royal palace in Frankfurt will be scrambling to pretend things are under control, and gobbling up Portuguese bonds. Sure enough, this has been confirmed. But even we had no clue to what degree the spin to "explain" the situtation would reach. According to the FT, the ECB was "forced" to buy Portugal bonds. FORCED. Because unless the ECB did what was expected of it (see global moral hazard), the convergence trade between reality and central planning may have finally generated record daily P&L. Luckily for all those who still have their heads shoved deep in the sand, the bank that Weber prudently told to go and do some anatomically impossible things to itself, was FORCED to bail out Portugal from the rough sea of reality yet again. Also, after an untarnished two week record of non-monetization, widely publicized by the ECB's favorite news rag, the ECB's SMP will once again be burdened with exposing that the beautiful dream of prancing European unicorns, purple skittles and rainbows is once again coming to an abrupt end.
From said rag:
The ECB was forced back into the market as Portugal’s cost of borrowing on 10-year debt jumped to a fresh euro-era high of 7.63 per cent, traders said. The ECB temporarily suspended its bond buying programme in the middle of last month.
European policymakers and investors say Portugal’s cost of borrowing for 10-year debt is unsustainable above 7 per cent amid warnings that Lisbon might struggle to refinance €9.4bn of maturing debt by the end of the second quarter
The ECB buying, which was in small amounts, reversed the move higher as yields fell back to 7.34 per cent.
Portugal’s first bond syndication in a year has also traded poorly in the secondary markets, exacerbating concerns. The five-year €3.5bn bond attracted strong demand when it was launched on Monday, but has subsequently seen selling from hedge funds.
“This is the trend Portuguese yields have been following since November,” said Filipe Silva, head of debt trading with Portugal’s Banco Carregosa. “If the ECB wasn’t in the market buying the price would be much higher.”
Sigh. And only yesterday we said: "And while everyone is now focused on what is going on with the Chinese
tightening regime (with expectations of two-three more liquidity
tightening steps over the next several months) with much speculating
over just how priced in all this is (not much if one looks as the Bombay
Sensex or even the SHCOMP for that matter), the real focal point should
once again be on Europe." That was fast.
We urge everyone to read our post on why things in Europe are going to get very ugly in T-minus three weeks: "Will March Be This Year's Cruelest Month?"
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