More Bad News For German Banks: Bund Curve Pancakes

Tyler Durden's picture

Following this morning's near terminal posturing by JC Trichet, who almost, but not quite, is about to hike rates any minutes now, we promise, which saw the EUR surging to near 1.40, a far more troubling side effect is the accelerating flattening of the Bund yield curve. As can be seen below, the German 2s10s has dropped from a high of 210 bps in December to 156 bps, a nearly 25% contraction. Luckily, it has another whopping 14 points to take out the September lows, which back then resulted in deplorable European data, indicating how much more sensitive the continent is to the fluctuations in the yield curve. Furthermore, as March is when the calendar festivities in Europe start for real, German banks are rightfully cursing JCT to hell following his failed attempt to secure his ECB legacy as a hawk on the way out. Should the ECB indeed follow through with an April tightening, look for the iTraxx Senior Financials index to start the slow grind wider as risk in European banks come back with a vengeance.

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hugovanderbubble's picture

Aareal Bank is in default

Aareal Bank AG (ARL GY): KAPUT

No one could afford the Commerzbank Yearly Debt Scheme-Schedule


Deutsche Bank is trapped with Sovereign Debt

Naked short Selling Ban ends late march....


Ready to sell The super German Empire and back to reality, that they have been doing tricky accounting to avoid the worst ratios in their Fraudulent Stress Test.

Ackermann Must Resign ,

Weber must be the guy that manages Germany no Merkel.


Short Commerzbank - CBK GY EQUITY

PY-129-20's picture

Funny you mentioned the Aareal Bank, because there are hundreds of positive news articles about their stocks in German media for over a week now. All are screaming "Buy, buy, buy"

The ordinary German doesn't want this kind of "Aufschwung". Many commentators and ordinary people are aware of the real situation. Hey, they were lied to by the German elite for over twenty years now. Right now, after almost a year of only positive news article (exception: Euro news), it is getting harder for the bears in Germany to stay critical.

I never trusted any of their cheap statistics and accounting tricks. The only thing that holds our economy together is China right now. And that scares me.

pendragon's picture

the ecb are a ship of fools...witness the summer 2008 ratehike. hawkish in jan, dovish in feb then hawkish again in march. is jct long euribor vol? with these jokers at the helm this baby is gonna keep flattening

Zero Govt's picture



Any plans to cover the Lehman v Barclays Capital trial that's just wound up in New York this week?

Barcap 'won' a scumbag victory with a ruling the Lehman deal was 'fair' but the Lehman Estate was vindicated. Judge James Peck had previously referred to Barclay chief Bob Diamond's evidence as 'devious', and while he didn't quash the Lehman deal Peck agreed with the Lehman trustee, James Giddens of Hughes Hubbard & Reed. Barclays attempted to literally steal $4bn in cash margin held by clearing houses for exchange-traded derivatives, plus $769m in cash held in “15C3-3”, or protected customer accounts. 

Once again we have total anarchy where Big Banks are allowed to do anything by Big Govt and their Regulators. It is left to investors or customers having to sue Big Banks to get any justice, as the scum of Govt and its Regulators sit on their hands and whistle Dixie 

pagan's picture

The only way forward for Europe is for the Germans to get rid of Merkel. Significant haircuts to the bondholders of Greek, Irish, Portugese and Spanish debt, like 60-70 cents on a dollar.

No even more radical. Kick out them nations mentioned including Spain. Then the Euro has a future. Could even become the world new reserve currency

hugovanderbubble's picture

Yes Kick Spain and Portugal from The Euro.


haircuts age coming


Ready to megadefaults.

bingaling's picture

Problem is the bondholders are just north of club med and if haircuts are taken it just makes the North EU look as bad . It is a ponzi .

simonsito's picture

which is why i am convinced that this goes on until bunds are sporting yields north of 5%, which will give the delusional german voter a blow in his BILD.DE-diluted mind..... but thats not for this year i guess.

there are elections, but to me my fellow germans dont look like being angry towards those who are responsible - last year they hated the greek instead of the greeks counterparties, which is (direct or indirect via another layer of counterparties) deutsche bank and other zombies..... which just turn out to be as influential here in GER as they are in the US.

Mr Lennon Hendrix's picture

Why doesn't Angela leave the Euro already?  We all know she wants to.

pendragon's picture

the reds are a buy here. this is a one and done (if they get through march unscathed otherwise it's a none a done)

hugovanderbubble's picture

Just Ask why Germany doesnt swap gold in 2007- According to Washington Agreement"...just think why...cos the future is hard assets currency linked system.


Whole Bundesbank are  part of the scam and i hate Germany cos they are playing with all euro countries.

PY-129-20's picture

I am German and you're right about that. But if things will get ugly, forget about the EU. That'll be the end of the old EU. The German elite has learnt their tricks from the American elite. Middle class is dying in Germany. Munis are almost bankrupt. For over twenty years German workers lost income. Now, the elite is basically doing the same as in America. Swiss people often say to Germany "little USA". At least, we don't have such a military apparatus.


simonsito's picture

schöne zusammenfassung :)

the fact that the swiss are comparing us to the US is telling itself....i thought they watch us as some fool within the same family, but maybe that has changed with the german becoming more and more sheepish over the last 30 years.

Oh regional Indian's picture

Bund Pancakes. Mmmmmmmmmmmmm......

So, clearly, all CB's have been told to talk and confuse the crap out of the market. Yesterday was the US, today Europe.

i have a deeply fundamental question.

Why does one of the world's largest net exporters need debt? Why does Saudi Arabia, with the world's most liquid commodity, need debt? Why do countries with healthy, positive trade balance economies need debt?

Was it thrust down the world's throat in 1933, principle unpayable?




hugovanderbubble's picture

The Financial system needs urgently a reset

All Countries will need to have Gold ,silver and other hard assets as collateral.

The bad new, is Venezuela is making a financial parallel system tied to crude oil - OIL CURRENCY LINKED SYSTEM ,

2 big schemes...


Fiat currencies are dead in the mid-long term.


Just a matter of time,

JoeSexPack's picture

Debt to govt's from privately-owned central banks benefits those banks' owners that profit from interest on 'money' created from nothing.

Debt helps politicians buy votes & power. That the money is not theirs & will be repaid by others after they leave office makes the spending that much faster.



Oh regional Indian's picture

Pithy and sounds right. Thanks JoeSP.

So, no real reason at all really. Except power and postponement of pain.


KCMLO's picture

I've asked myself the same question.  I think the most basic answer is greed.  If you have a leveragable asset (in this case future economic output) why not borrow against it and have even more?  It's not like YOU are the one paying it back.

trav7777's picture

the Bernank said it while talking to Rep Kirk- there would be no currency without debt

HTZMR's picture

Interesting. Commerzbank shares among the main gainers in the DAX and it is certainly an exceptionally troubled bank that couldn't even pay the German government interest on its bailout capital. Thanks for outpointing as always ZH, will keep my eyes peeled.

HTZMR's picture

Interesting. Commerzbank shares among the main gainers in the DAX and it is certainly an exceptionally troubled bank that couldn't even pay the German government interest on its bailout capital. Thanks for outpointing as always ZH, will keep my eyes peeled.

hugovanderbubble's picture

Use in Bloomberg


CBK GY EQUITY DDIS go and u will c the real pain...

JoeSexPack's picture

I assume flattening German Bund yields are good for Germans paying lower interest, but bad for fellow Euro's struggling to keep their bond rates down, thus raising inter-Euro tensions.

Meantime, a rising Euro doesn't help German exports.

A new D-mark will be strong, & their exports will tank.


Dick Darlington's picture

What abt the spanish banks, hmmmm. Deflating housing bubble and majority of the mortgages tied to euribors. Go ahead JCT and hike rates, we'll see how that game plays out. With official UE-rate north of 20% and recent reports indicating that the job shedding continues i can't wait the outcome.

Josephine29's picture

There are a lot of potential implications way beyond the possible effect on inflation if Mr.Trichet carries out this threat to raise interest-rates.

Imagine the impact of this on Ireland, Greece and Portugal who have been supported by lots of cheap liquidity provided by the European Central Bank. This will be much less help as the price of it rises.


The more I think about it the more dramatic the mpact seems on countries who have only been able to survive due to very low interest-rates....

simonsito's picture

The more I think about it the more dramatic the mpact seems on countries who have only been able to survive due to very low interest-rates....

is there any EUR-sovereign that not on that list?

I think the way of the Bernank will be ours as well, apart from the possibility of a german turnaround, which would blow up the whole EU, and this might have been Axel Webers final reason to jump off the ship.... it was really sad to see him being demolished all the way through 2010, so his departure was not really a surprise. maybe hes now goin for the last few bonuses at DB to pocket before the shit hits merkels bad hair...

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