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Portugal Prepares To Sell $1 Billion Of Dollar Denominated Bonds In Goldman-Led Deal

Tyler Durden's picture




 

Yet more rape and pillaging of US taxpayers as Portugal now plans to join the long and exalted list of nearly bankrupt countries who wish to join the dollar devaluation bandwagon, and issue debt denominated in dollars. The P in PIIGS is in the same position as the US, needing to plug a massive budget deficit, so it has decided to do what the US does so well - issue bonds with a $ sign on them. Bloomberg reports: "Portugal is selling bonds in
dollars for the first time since November as part of a plan to
issue 25 percent more debt this year to fund its budget deficit. The nation is marketing $1 billion of five-year bonds that
may be priced to yield about 100 basis points more than the
benchmark mid-swap rate." And this is merely the beginning: as most European countries are convinced the pain in Spain is nothing compared to what Washington is about to experience, we expect to see many more deficit whores attempting to jump on the dollar collapse bandwagon.

From Bloomberg:

“It’s not surprising that Portugal is coming to the market
now as many European sovereigns tend to borrow more in the first
half of the year,” said Ciaran O’Hagan, a fixed-income
strategist at Societe Generale SA in Paris. “Portugal will
likely achieve a better rate of funding in dollars so both the
government and taxpayers are getting a better deal.”

The proposed spread on the new bond issue gives an overall
yield of 3.59 percent, according to data compiled by Bloomberg.
That compares with the 3.32 percent yield offered by Portugal’s
benchmark five-year issue in euros.

By issuing in dollars, European governments can reduce the
cost of euro-denominated interest payments, as measured by the
five-year euro basis swap. The basis swap is at 20 basis points
less than the euro interbank offered rate, compared with 15
basis points less than Euribor in January, according to
Bloomberg data.

Relative funding costs compared with a euro-denominated
bond sale were “favorable,” said Alberto Soares, chairman of
Portugal’s government debt agency in Lisbon.

“It’s been our plan to issue foreign-currency bonds, and
it’s just a matter of identifying the window of opportunity,”
Soares said. “We may consider issuing bonds in other
currencies, but there’s no concrete plan on that for now.”

And so much for the lock out of Goldman Sachs from European bond issuance:

Deutsche Bank AG, Goldman Sachs Group Inc., HSBC Holdings
Plc and Morgan Stanley are managing the sale of bonds, the
banker familiar with the terms said.

 

 

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Thu, 03/18/2010 - 09:03 | 269148 john_connor
john_connor's picture

Remove all paper assets from the system and ask questions later.

Thu, 03/18/2010 - 09:03 | 269149 Clinteastwood
Clinteastwood's picture

Naked shorting financed by a carry trade guaranteed by Uncle Ben, no SEC or Congressional oversight (if there ever was any), no US laws.....that's pretty cool......how do I sign up?

Thu, 03/18/2010 - 10:50 | 269251 JR
JR's picture

You kiddin' me, Clint? Youse think dis is a democracy?  

This is an exclusive world syndicate, ninety percent. Money is force; they print it in torrents, courtesy the US Congress. And that translates--POWER.  These rats have been gnawing at the roots of America for decades. Try to “sign up” and they’ll break your kneecaps… 

It's a Barnum and Bailey world,
Just as phony as it can be

 

Thu, 03/18/2010 - 09:09 | 269153 TraderMark
TraderMark's picture

Scott Bleier on Yahoo Tech Ticker - Behold the Zombie Market (video)

http://www.fundmymutualfund.com/2010/03/video-scott-bleier-behold-zombie-market.html

Scott Bleier, president of CreateCapital.com, calls a "zombie market," where the vast majority of trading volume is computer driven and occurs at the open and during the last 10 minutes of the session.

Bleier's theory -- which definitely has some "conspiracy" elements -- is that policymakers at the highest levels of government have come to the realization that "it's the capital market tail that wags the economy's dog."   While there's no way to prove the "plunge protection team" is in the market buying futures to make sure major averages stay above "critical" levels, what is true is the Federal Reserve has taken extraordinary measures to aid the financial markets.

 

Thu, 03/18/2010 - 09:17 | 269159 Captain Willard
Captain Willard's picture

After jamming the shorts, they are scrambling to issue new debt as fast as they can.

Thu, 03/18/2010 - 10:27 | 269222 BobPaulson
BobPaulson's picture

I probably said this before but awesome icon dude.

Thu, 03/18/2010 - 09:22 | 269161 Cookie
Cookie's picture

Goodbye America, it was nice knowing you, for a while at least

Thu, 03/18/2010 - 09:22 | 269162 bugs_
bugs_'s picture

"identifying the window of opportunity"

Thu, 03/18/2010 - 09:29 | 269165 Pladizow
Pladizow's picture

Game over, thanks for coming out America.

US$ = Dead Man Walking.

Thu, 03/18/2010 - 09:40 | 269176 Oso
Oso's picture

Is there actually nothing that can be done about this?!?!  I just cant believe there is no recourse to prevent this.......

Thu, 03/18/2010 - 11:28 | 269304 leftcoastfool
leftcoastfool's picture

Well, we could start acting with some fiscal responsibility, stop printing money hand-over-fist, raise interest rates, etc.  That would put Portugal in a bind as they try to pay back the bonds with stronger dollars...

Bwah-ha-ha-ha-ha.... Wake me up when that happens!

Thu, 03/18/2010 - 09:51 | 269187 Cognitive Dissonance
Cognitive Dissonance's picture

Around and around she goes, where she stops, nobody knows. Round after round after round, the illusion is sustained but the illusion itself.

Personally I firmly believe that every high school should have a mandatory class in illusion creation, with guest speakers including magicians, professional political and media "spinners" and various con men (rehabilitated of course). This will never happen because the government/corporation duopoly wants mindless consumers, not informed citizens.

But a man can dream, can't he?

Thu, 03/18/2010 - 10:47 | 269249 Steak
Steak's picture

Poetic and somewhat literary, I like your style CD.

I spent a little time trying to figure out what kind of issuance of Yankee Bonds has been done (in any timeframe really).  While unable to come up with a comprehensive figure I was able to find a good article from Dow Jones (via WSJ) talking about record Yankee Bond issuance in 2009-10:

Foreign countries and companies are issuing dollar-denominated debt--frequently called Yankee bonds--at a record pace this winter, tapping the world's most liquid market after being banished to the sidelines for much of last year. They're working in dollars so they can pay back existing greenback debt or fund U.S. operations without converting currency, or just because they can get the best deals in these markets.

So far this year, foreigners have issued $130.1 billion in bonds in the U.S., according to data provider Dealogic, nearly a quarter of all dollar-denominated issuance.

European governments, supranational agencies and quasi-government entities, are also tapping U.S. investors with dollar-based debt. Several were in New York this week to meet investors at a seminar arranged by the Royal Bank of Scotland Group PLC. Italy has already issued dollar bonds over the past year. Meanwhile, the Netherlands is preparing to start issuing in dollars, as is state-owned Dutch municipality lender NWB Bank. Representatives from both were at the New York event.

http://online.wsj.com/article/BT-CO-20100305-709710.html

Thu, 03/18/2010 - 09:51 | 269188 CB
CB's picture

banksters are looting all the way to the bottom

Thu, 03/18/2010 - 09:52 | 269189 d_7878
d_7878's picture

and let me guess, they will shove all this crap into the pension funds like they have been doing for years, then they can all collect their big fees and have a big laugh

Thu, 03/18/2010 - 10:00 | 269195 Richard Whitney
Richard Whitney's picture

What could go wrong with this picture? That the dollar strengthens.

Thu, 03/18/2010 - 10:42 | 269245 KidHorn
KidHorn's picture

My thoughts exactly.

Thu, 03/18/2010 - 10:22 | 269215 spanish inquisition
spanish inquisition's picture

Step 1 - Fed, throw out all rules and saves friends with liquidity. (Check)

Step 2- Re-inflate market through friends computers saved by liquidity. (Ongoing)

Step 3- Keep interest rates low by monetization to aid in risk trade for Step 2 and keep low for 2-3 years through ARM resets and 2012 junk bond rollovers.

Step 4 - Continue to manipulate Gold to help ease inflation fears using the usual stuff. Put some IMF gold up for auction that no one is allowed to buy creating a ceiling. (BTW, I liked the Thunder Road piece - the only thing I would do is split the equations between gold valuations in normal vs abnormal times. It's bipolar.)

Step 5- Maintain range bound valuation between Dollar, Yen and Euro to maintain market ramp up (Step 2)stability. With QE ending, a stronger dollar will emerge which is not good for rest of world right now. Options are to pressure China to revalue and enable the FED or have GS start writing dollar bonds. (See above)

Step 6- Continue with the "Oh shit, we have a problem.." recovery plan. Keep mortgage issues buried on bank balance sheets. Keep donating shit loads of money to politicians. Hopefully unemployment will abate in time to bury all the debt with the taxpayers. Reiterate during Reagan administration that banks and Fed are the best people to regulate themselves.

Thu, 03/18/2010 - 10:45 | 269248 Cognitive Dissonance
Cognitive Dissonance's picture

By the book. They don't even hide it. That's the true pathology of the psychopath or sociopath. It's all in plain sight, published in the daily register called mainstream media, academia and the products of the so called think tanks, to name just a few.

Just flip on the TV if you want to know what's coming next. Predictive programming, 24/7/365.

Thu, 03/18/2010 - 11:03 | 269269 Popo
Popo's picture

And when everyone in the world is short the USD, that's when the dollar goes to the moon and America owns the world...

 

 

Thu, 03/18/2010 - 11:27 | 269300 Hephasteus
Hephasteus's picture

Those bonds aren't crazy glue bitches!!

Thu, 03/18/2010 - 11:28 | 269305 Nicodemus
Nicodemus's picture

Carry trade meet liquidity crisis.  Liquidity crisis meet carry trade.

Does it feel like 2007 to anyone else?

Thu, 03/18/2010 - 12:20 | 269380 nonclaim
nonclaim's picture

yep. same plus government backed extra liquidity.

Thu, 03/18/2010 - 11:58 | 269350 Hondo
Hondo's picture

If you buy this...you will be screwed!  But you should expect that........If you're buying it with other peoples money... you will be sued.

Thu, 03/18/2010 - 18:49 | 269750 steve from virginia
steve from virginia's picture

 

The dollarization of Europe begins. What is acknowledged is the end of the euro as it has failed for both its purposes which are to hedge against dollar- instigated oil shortages and to provide monetary security for all European members. 

What is also acknowledged is the increasing deflationary power of the endlessly hard dollar.

That's right, the euro is kaput. Things ARE different this time.

I would just like for one more time (just one more bubble, please!!!) for crude oil to bolt up to $120 a barrel and allow a soft dollar for a few days.

A soft dollar, remember those? "Bernanke be damned, he's killing the dollar!" Remember?

That would last for just a few days as the high priced crude would cause business to collapse and the newly formed hearts ripped still beating from the world's economies. Oil consumption would crash as a consequence and prices plummet.

Eventually, the price in dollars would rise again and the dollar/crude peg would reform. The outcome of the volatility spike would be thousands of business failures, more sovereign failures and tens of millions more unemployed. At the same time, there is no escape from the peg. The dollar/crude peg represents depletion translated to 'market'. Its the upper bound, the limit imposed by production as measured by the most available currency. The peg is as perverse and diabolical as the rest of US financialism. We deserve it.

The dollar/crude peg cannot be broken. Goldman- Sachs probably understands this, they are pretty clever. So does the government of Portugal. Do we?

Saudi Arabia understands peak oil. So do most of the other producers. Of course they understand, they are living peak oil! We refuse to believe it - deny and lie to each other - and are now condemned to live the hard currency consequences. Our lazy and pointless (and stupid) consumption has created an ironic and devastating form of time machine. We are all now living in 1931. We'll pause here for the Great Depression to have its sport with us ... before it rockets us back to the 14th century.

Hope you like your ride! Buckle your seat belt!

Thu, 03/18/2010 - 20:18 | 269794 Bob
Bob's picture

Fuck an A, A, A . . .

This is a serious threat as an economic trend.  GS contructs deals with other sovereigns denominated in US dollars that are, ultimately, guaranteed by US Citizen Taxpayers? 

I see them opening a dedicated branch office for this trade in most every foreign nation.  Or am I thinking too much like a businessman?

Perhaps I should delete my own post, since I can answer my own question already: Why open an office?  Just wine, dine and pay.  Damn, that's slick. 

Evil, but slick. 

Fri, 03/19/2010 - 01:35 | 269950 Buck Johnson
Buck Johnson's picture

With all these dollars and other countries selling bonds in dollars will eventually start massive inflation in that currency no matter what the fed does.  And your right also, we may be fortunate to see the start of the breaking up of the Euro currency while other countries decide to go back to their own currencies in order to stop inflation or devaluation.

Wed, 04/14/2010 - 08:34 | 299754 mark456
mark456's picture

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