LCH Clearnet Hikes Irish Bond Margins To 35%

Tyler Durden's picture

Two days ago we demonstrated that the the charts of Irish bonds, which has now joined Greece, and soon Portugal, in being locked out of capital markets, looked like, as Citigroup put it, a Nightmare on Kildare Street. Today in an attempt to normalize the market, yet which will only remove even more marginal (pardon the pun) liquidity, LCH once again hiked Irish bond margins, from 30% to 35%. And just as the case is with precious metals, soon no margin will be allowed and 100% cash (or gold) collateral will be demanded. In the meantime, look for bid/ask spreads to surge, the ECB buying to be the only buying in all peripheral markets, and CDS traders to once again start being demonized following the starting EU summit which will achieve nothing, but spread further confusion, and even more doubt about the viability of the euro.

From Reuters:

European clearing house LCH.Clearnet raised the margin requirement on Irish government bonds to 35 percent from 30 percent on Thursday after a jump in Irish spreads on renewed concern it can service its debt in the longer-term.

The move will make it more expensive to trade Irish sovereign debt, already a thinly traded paper, and underlines the scale of Ireland's debt crisis four months after a bailout was agreed with the EU/IMF.

"This decision is based solely on publicly available yield spread data and in no way represents a forward-looking market view," LCH.Clearnet said on its website after it cut the margin call.

Ireland's borrowing costs have hit euro lifetime peaks this week amid worries its banking crisis is even worse than previously feared and resistance from European leaders to giving Dublin further help immediately.

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Natasha's picture

Sorry for being off topic....

Meanwhile Russia announced it was checking a Panama-flagged vessel that arrived in its Far East region from Japan with radiation levels three times the norm, the head of its consumer protection agency said Thursday.

The ship had delivered a cargo of plywood to Japan and had passed close to the quake-damaged nuclear power plant at Fukushima on its return voyage, Gennady Onishchenko said, the Interfax news agency reported.

"In the cabins of the ship the level of gamma-radiation was within the norm but in the engine rooms it was three times higher," he said.

He said that it was believed the radiation had passed into the engine rooms through a ventilator.

The ship has been placed in quarantine on the Pacific coast of the Khabarovsk region in the Far East and its crew of 19 have been placed under medical supervision, he said.

johnnymustardseed's picture

Went to the dentist today, had x rays so.......

I'm turning Japanese
I think I'm turning Japanese
I really think so
Turning Japanese
I think I'm turning Japanese
I really think so

jkruffin's picture

Man, no wonder I can't win, I've been doing all backwards....

When all the countries in your currency are bankrupt and defaulting, the currency gets stronger... Why didn't someone tell me this in economics class?



Advoc8tr's picture

Tell me about it dude.... German index to the moon on the news - here I was going short thinking that as they have huge exposure to Irish / Potugese default / haircut their market should take a hit :-(

jkruffin's picture

When this scam Euro long trade unwinds, its going to be one hell of a ride as it and stocks plummet.  I can't imagine how many are on the long side of the trade, but its a ton of them. 

sunkeye's picture

yeah book lernin' jus fer idjits i reckon ha good one thanks for a brkfast chuckle all that tuition dough i paid thru the nose lotta good it did me

i guess the way to trade it - anything - these days is to figure what seems logical and go the other way



Curtis LeMay's picture

> even more doubt about the viability of the euro.<

The sooner that monopoly money goes away forever, the better...



Racer's picture

And markets are taking off with all this fantastically bad news

snowball777's picture

Good news: up with decent volume.

Bad news: up with light volume.

assumptionblindness's picture

Ah, it seems like it was only yesterday when fear of a Greek default got people talking about the Euro reaching parity with the Dollar.  Ireland and Portugal's bonds have gone to hell and Spain is in the batters circle. 

Nowadays nothing seems to hurt the Euro because, by comparison, the Dollar is headed towards parity with Kleenex.  Maybe Ben would be so kind as to infuse some aloe and lavender perfume into the next $2T that he prints...

sunkeye's picture

usd '... headed for parity w/ kleenex'

luvd it t/y for a good brkfst table chuckle


THE DORK OF CORK's picture

When a countrys banks are not producing credit and its sovergin is being feed by ECB gruel then it will implode - how could people be surprised.

It is not entirely bad however - the various vultures that feed off Dublin Castles largess are also beginning to starve as they need a monetory updraft to fly and forage.

Its great entertainment to see this second rate matrix take chunks out of each other.

Escapeclaws's picture

Dork, what happens to the depositors in Irish Banks?

THE DORK OF CORK's picture

Well yes , who knows ?

The ECB and Irish Goverment has helped most of the bondholders to escape by preventing rollover - this is ominous.

Now the liabilties withen the banks are too much for the sovergin.

In such a scenario at this stage it may be best to honour checking accounts and goverment post office savings and haircut the term deposits.

That should make the poltical situation interesting if most of the bond holders are seen to escape.

But that is just my amateur take on the current situation.

MachoMan's picture

There will always be domestic default before international default.  However, that is not to say it has to be the entire lot of debt.  Meaning, at the initial stages, we back international creditors at the expense of domestic citizenry.  At some later, undetermined point in time, after the pains of austerity have been felt, the citizenry have a really, really hard time understanding why money is flowing out of the country at the same time the citizenry is hungry.  Maybe this is Ireland's paradigm shift?

The sad part is, we haven't even begun this process in america...  not in earnest anyway...  the sands are shifting, but not much has materially developed.  I'm hoping we just skip to the second stage...  although, there is no ideal solution...

sudzee's picture

Makes sense that stocks rise. Stocks have a bit of value while fiat dies a natural death. S&P to 100,000.

jkruffin's picture

LOL  I hope that is sarcasm  HAHA

disabledvet's picture

no, no "the market is actually rising."  i watching "getting ready to do it again" right now.

Urban Redneck's picture

All this déjà vu is making me nauseous.  2 Bear Sterns CDO funds have some “problems,” prime brokers/fools jack their margin rates and start a meltdown of their income statements in the process.  Contagion spreads, eventually to ABCP when main street finally notices.  Fast forward- a third PIIGS has some “problems,” prime brokers/fools jack their margin rates...  The Sovereign/CB one-trick-pony show printing press may work when the “problem” is a bankster CDO but it only exacerbates the situation when the “problem” is said Sovereign/CB’s other paper instrument.

DavidC's picture

More crises, more bailouts and one man left standing - Goldman Sucks...


jkruffin's picture

Political leaders have got to stop the madness going on, they have to stop these Central Banks from creating these kinds of markets. Every CB is leveraged now worse than the TBTF were in the last collapse, and the TBTF banks are now leveraged just as much as they were before and they are now bigger.


Racer's picture

They never stop madness if they get rewarded for doing nothing

snowball777's picture

And crash the retirement accounts of their favorite voterbots? Nevah!

disabledvet's picture

"gold as collateral for debt."  now we're talkin'....what say all of you should the "gold to debt" ratio be?