New Global Effort To Patch European Insolvency Holes Buys One More Day

Tyler Durden's picture

Europe is now literally living day to day. After last night it was announced that Japan is joining China in purchasing a substantial portion of European debt, using its FX reserves to buy up to 20% of European issuance and thus becoming simply the latest selfish trade surplus country doing all it can to keep its key export partner afloat (to the detriment of USD bond purchasing, confirming the Fed's monetization of debt will never end), today that ultimate backstop, the ECB, has for the second day in a row been purchasing Portuguese bonds to make sure there is no collapse in the sovereign debt market. The good news: Greece managed to place €1.95 billion in 6 month Bills... at the ridiculous rate of 4.9% and 3.4 Bid to Cover, which nonetheless happened to be an deterioration in both rate from the previous November 9 Bill auction, printing at 4.82%, and had a much higher 5.15 bid to cover.

From the AP:

Greece on Tuesday raised €1.95 billion (US$2.5 billion) in a treasury bill auction, easing concerns in the troubled eurozone country a day after bond yields hit a record high.

The country's Public Debt Management Agency said the 26-week bill auction for the starting amount of €1.5 billion was oversubscribed 3.4 times and sold at a yield of 4.9 per cent.

On Monday, Greek bond yields touched another record high, exceeding the 10-year equivalent German yield by 10 percentage points for the first time, amid a broader flare-up in Europe's debt crisis.

Tuesday's debt auction was considered an important test of market sentiment. The previous auction of 26-week treasury bills, on Nov. 9, resulted in a yield of 4.82 per cent.

Greece has launched a major effort to cut borrowing costs in exchange for bailout loans worth €110 billion from the IMF and other countries using the euro. Despite being in recession, it's ambitious deficit-reduction targets broadly met last year.

The government insists it wants to return to long-term bond markets sometime this year.

It has gotten so surreal that G-Pap has even said that "EU issues are adding to Greek credit rating problems." You read that right - the country that exists only due to the EU's magnanimity (and M.A.D. arrangement), has now decided it has all the leverage to demand that the EU gets its house in order or else.

In the meantime Greece also announced that Bernanke's plan to drown the world in a tsunami of inflation is at least working six thousand miles away, after Greek consumer inflation increased 5.2% in December compared to 4.9% in November. Oddly enough real interest rates in Greece may actually be some of the lowest in the world soon enough...

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TLT's picture

I think governments are well aware of the situation.

"They" aren't going to let Europe "die" alone.

We'll have hell on Earth sooner or later, if the financial system doesn't change.

EscapeKey's picture

Why would the financial system change, considering it's been so good to the people in control of it?

breezer1's picture

how do you say house of cards in portuguese? 

TLT's picture

Please edit your comment and also ask how do you say in spanish, italian...

Bahamas's picture

castello di carte Italian

All is chosen's picture

it can be done, but on a sunny day in the quiet hills of the south-west Algarve, with solar panels having fully charged the batteries; & the solar shower up to temperature; & a glass of red in my hand, who cares? :) - (please give generously; it's not our fault that the dozen or so (interlinked & oh so kind to each other) mafia families that have bled this small country dry since joining the EU, are still very much in charge; together with their dictatorial arrogant public sector operatives that us peasants pay for). 

Wheatman's picture

No Tyler, it buys at least 3 days.

Josephine29's picture

Actually it looks like the ECB has found a friend in its purchases of Portuguese government debt. I will let the excellent notayesmanseconomics take up the story.

The Portuguese government is not answering questions on the subject but Bloomberg helpfully tells us there is some one billion Euros of this in issue. Everyone will suspect China bought this bond but whilst we are waiting for more information let me give you a suggestion why Portugal has made a move even Greece rejected. The lack of a coupon means that she will have no interest payments to make which helps her deficit numbers.


If you cant sell your debt then do it privately at a price you do not announce!

ZackAttack's picture

Vendor financing. That always works.

Rodent Freikorps's picture

This is so unfair. Isn't there a third world country we can buy. How come the Asians get good fire sales?

AnAnonymous's picture

Third world countries are sold out. The US bought them all with debt.

Id fight Gandhi's picture

Someone forgot to buy spanish bonds, yields are soaring.

yabs's picture

WTF? How can Japan the most bankrupt nation in an increasingly bankrupt world "buy" anything?

Isn't this like bernie madoff bailing out Enron?

What a f*cking chirade

AnAnonymous's picture

I buy your debt, you buy mine. Apparently, you can walk a long way with that.

oogs66's picture

From what I can find, Japan is going to buy EFSF debt.  Why is this a big deal?  Even the most bearish people (me included) have not argued that EFSF wouldn't be able to sell AAA rated paper that the ECB would finance!  It might shave a few bps off the EFSF funding rate, but this is not real news, its a no brainer, and don't chase the rally sparked by Japan buying AAA quasi government debt.

Rider's picture

Is this madness never ending?

They buy one day, then a year and this has been going on for decades now.

Perhaps they found the Perpetual Ponzi Machine.

yabs's picture

how much longer can this contin ue?

its like they are defeating nature and mathamatics themselves

I am pig sick of it


holsfhf's picture

if the big bernank wants a weak dollar in return to get a strong euro   ... why don't the big bernank buy some of the yellow stuff .... that will make the correlations go bonkers

yabs's picture


looks like krakatoa may be about to blow its load

but its opk the coffee will be ok