Portuguese Bond Auction Prices, EURUSD Mostly Unchanged

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Wed, 01/12/2011 - 08:07 | 869527 Michael
Michael's picture

The PIIGS are not getting a Bail Out.

The PIIGS are getting a Debt In.

That's short for Debt Injection. It's to prevent the big banking house families from getting scalped on their bond holdings.

Wed, 01/12/2011 - 08:21 | 869537 Oh regional Indian
Oh regional Indian's picture

Nice Michael. And true. It's time to call things for what they are. Like Debt cards (Credit Cards), Debtworthiness Score (Credit Score) etc.

But, for the Portuguese bond story, take a look at this map...



Look at the positions of Iceland, Ireland and Portugal.

Outliers? I thought it was a little freaky and literal.




Wed, 01/12/2011 - 08:29 | 869539 Sudden Debt
Sudden Debt's picture

You couldn't have said it better.

Their 2010 deficit is 7.3%, unemployment is up and any austerity programms they've done will soon affect the rest of the economy.

It's like a miracle just happend. LOOK AT US, WE DOWNPAID DEBT WITH MORE DEBT! And not a single sollution for their crisis was presented besides empty words.

They can play another round en possibly a lot more but in the end when interest payments + opperation costs > GDP it's over.

The question is, at which moment will yields just drop below zero and make it profitable for a country to own debt?

Untill then, we can only guess how many episodes there will be on this series. Let's just hope they didn't hire the writers of Lost...




Any yield that is higher then economic growth + deficit => BAD.


It's not that hard to figure out.

Wed, 01/12/2011 - 08:57 | 869573 firstdivision
firstdivision's picture

They'll just raise the debt ceiling like we are about to.

Wed, 01/12/2011 - 12:48 | 870236 Michael
Michael's picture

Wall Street gets a Bail-Out.

Main Street gets a Debt Injection(DI), for its disease.

Wed, 01/12/2011 - 08:12 | 869531 Josephine29
Josephine29's picture

Of course the large amount of buying from the European Central Bank which is estimated to now own more than 20% of Portugal's total national debt has helped this auction. Many will be wondering what would have happened if it had not intervened in recent days.

Also if you look at the countries that have been "rescued" the situation has if anything got worse over time. As notayesmanseconomics points out about Greece and her situation.

If we stop and think we can see that Greece is under a rescue package effectively backed by Germany’s credit rating and yet if she borrows for 6 months she is having to pay some 4.4% more as an interest-rate than Germany would have had to.So whilst commentators can debate Greece’s position and whether such an auction is relatively better than the last the reality is that investors are unwilling to lend her money at an interest-rate which would indicate they feel the bail out is credible and remember they are only loaning the money for 6 months!


So this saga has a long way to go I feel.


Wed, 01/12/2011 - 08:28 | 869543 EconSammie
EconSammie's picture

I think that the article you quote from raises a valid issue Jo. This so-called rescue package does not look like much of a rescue when you analyse the position and I notice the article also questions the sudden improvement in Portugal's fiscal deficit...


Nice timing eh?

Wed, 01/12/2011 - 08:19 | 869536 Boilermaker
Boilermaker's picture

...and...PRESTO...I wake up and futures are up 7 SPX handles.

I would have never suspected it.

Wed, 01/12/2011 - 08:48 | 869559 scatterbrains
scatterbrains's picture

I sense that the fed dumps large blocks of /ES during the day, mostly near the open or close when liquidity is highest and then wait until no one is around in the middle of the night to buy back/ lift the market.

Wed, 01/12/2011 - 08:21 | 869538 David99
David99's picture

FED is criminal


Elite white-collar criminals must be heavily punished
Wed, 01/12/2011 - 08:25 | 869541 youngman
youngman's picture

I knew it would be "successful".....it had to be ..and so will tomorrows Spanish debt sale....the buyers will be sellers next week...to the ECB.....its such a scam....but for another month....everyone is saved....so they think

Wed, 01/12/2011 - 08:33 | 869546 Dick Darlington
Dick Darlington's picture

Seems that the politicians are really going full retard to support the ponzi. Chatter abt increasing the size of the cdo-like vehicle called EFSF which will sell bonds and use at least some of the proceeds to buy periphery bonds. Talk abt leveraging the taxpayers... Just to remind, EFSF has no money. They have to raise debt in order to do anything. Mr Rehn's comments serve as an example of how retarded the whole situation is. He said that we must stop the debt spiral and in the next moment he said we must increase the size of EFSF which means they are going to print even more debt.

Wed, 01/12/2011 - 08:51 | 869565 Tic tock
Tic tock's picture

The interesting thing was that ECB stepped into the 2020 rather than the 1yr. Given the profligatracy that suggests a serious breakdown in rates control over the next year..if down wasn't up

Wed, 01/12/2011 - 09:34 | 869620 Ferg .
Ferg .'s picture

Why was this auction of any relevance ? Japan and China have announced their intention to backstop all toxic periphery debt and the ECB was buying Portuguese bonds earlier this week , pushing that yield back under 7 % . There was never any question that this was going to be permitted to be anything other than a successful auction .

Wed, 01/12/2011 - 09:58 | 869627 virgilcaine
virgilcaine's picture

Now back to the Euro and it's continued decline and eventual Fail.  The Basket where the assorted tarts are contained. You can see the effects of it all  on the lines of Ms Merkel's  face.. the weight of the entire Eu on her!! Go Angie!  Keep taking it  in the Azz for team Ben and O.

Wed, 01/12/2011 - 10:09 | 869648 Dr. Engali
Dr. Engali's picture

You know I hear the same thing every day. The markets are bracing for such and such auction. And it's always the same thing. Auction goes off okay and the markets rally. It never changes. I think it's just a bunch of bullshit to keep retail scared. Nothing is gonna happen.  We are going up. Buy the dips if there  ever are any.

Wed, 01/12/2011 - 10:19 | 869694 slow_roast
slow_roast's picture

It was just vampire squid; went extra-long equities yesterday, stepped in and funded $1.5B in bonds; rinse and repeat.  Easiest money ever made.

How the SPX can rally 8+ points on $1.5B in bond auctions is inane...if any one entity went long equities and then funded the bond purchase it would be one of the most simplistic strategies of all time. 

Wed, 01/12/2011 - 11:02 | 869832 CrankyOldCreditGuy
CrankyOldCreditGuy's picture

more interesting to me than the absolute level of the interest rate was the spread between the 4s10 collapsing from +276bps to +132bps.  the flattening of the curve tells me more about the situation than the absolute level. 

Wed, 01/12/2011 - 12:30 | 870168 CrashisOptimistic
CrashisOptimistic's picture


You know I hear the same thing every day. The markets are bracing for such and such auction. And it's always the same thing. Auction goes off okay and the markets rally. It never changes. 



They can do anything they want and we simply have to remember this.  Money is an abstract concept blah blah.

There is one and ONLY one thing they cannot create out of nothingness, and that is oil.  Rest assured they will try to.  They will change how this or that is counted to try to reduce its price, but in the end all of civilization depends on it, and as it gets more and more scarce, they will be helpless.

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