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Spain Cancels Market Auction, As It, Portugal And Belgium Go Syndicate, Spook Bond Investors (Again)
The reverse dutch auction model for Europe's insolvent countries is dead. Earlier today Spain announced it would cancel its planned bond auction for January 20, and instead plough ahead with syndicated issuance. For those unclear with what this means, Spain is essentially saying the market pricing mechanism on its debt is too transparent and adds "volatility" and therefore the country would rather have banks underwrite the whole issue i.e., take the issuance risk on their books, thus spare Spain the embarrassment of a failed bond auction. And Spain is just the start: Portugal and Belgium have followed suit, in an action that is sure to stretch the already frayed nerves of European sovereign bond investors as this kind of last ditch effort is always taken before something is about to go "snap." From the Irish Times: "Spain's Treasury, facing a volatile market as it looks for ways to
keep its debt costs under control, cancelled a bond auction planned for
Thursday and said it would issue a syndicated bond over 10 years. Belgium
is also seeking an opportunity to place debt with a syndicate of banks
and Portugal also plans one for the first quarter, as fiscally stretched
sovereign issuers elsewhere in Europe also seek to cut spiraling
financing costs." And lest readers get the impression that this is purely a European development, China just announced that it is suspending its sterilization bill sales for the balance of the week. Did the European bond market suddenly die?
From Irish Times:
Risks premiums on Spanish and Portuguese debt widened and one analyst said Spain's announcement could add a new layer of uncertainty to an already tense debt market.
"Some weeks ago this possibility was being speculated about. But, far from calming markets it could be interpreted as an attempt by the Treasury to avoid more uncertainty and assure financing at a fixed rate," said an economist at IG Markets, Soledad Pellon.
The Treasury said the new bond would be a similar volume as last year's syndicated issue, between €4 billion and €5 billion.
Spain sold €5 billion in its 10-year syndicated bond issue on Thursday, which was priced at 53 to 56 basis points over mid-swaps.
The Treasury is expected to pay a much higher price for the new issue with the euro zone debt crisis having sent premiums sky-high on fears Spain might be forced to apply for a Ireland-style bailout.
The premiums investors demand to hold Spanish 10-year bonos over German Bunds stood at 239 basis points, up from around 233 bps at the open today and a long way from pre-crisis levels of below 70 bps in April 2010.
The syndicated bond will replace a planned issue of existing 10 and 15-year bonds due on Thursday, the Treasury said.
It also appears that Europe still not heart Goldman:
BBVA, Barclays, BNP Paribas, Citi, Santander and SGCIB are lead managers.
As for China, it is also not immune from the vicissitudes of reality. From Market News:
The People's Bank of China said Monday that it is suspending open market sales of sterilization bills this week.
The central bank made its announcement in a short statement which did not offer any explanation. The statement also did not indicate whether or not liquidity will be adjusted via bond repurchase agreements on Tuesday or Thursday.
The suspension follows Friday's announcement of a 50 basis point reserve requirement increase, effective January 20, while the PBOC typically works to ensure that banks have enough cash on hand to meet the high demand associated with the Chinese New Year holiday, which begins this year on February 2.
Primary market yields on three-month and one-year paper rose for a third straight week last week as a result of the hike in benchmark interest rates announced by the PBOC on December 25.
The PBOC drained a combined CNY88 billion last week via seven, 14- and 91-day repos last week.
Central bank open market activity last week resulted in a net injection of CNY19 billion versus the previous week's addition of CNY16 billion, according to Market News International calculations.
The reserve hike will remove nearly CNY400 billion, according to analyst estimates.
And while we are not too worried about China (yet), we are a little more concerned about Europe. As are others it seems: the EURUSD, after trading at almost 1.34 on Friday on Goldman's "surprise" upgrade of the pai, dropped as low as 1.3240 overnight before briefly reversing its losses. It is going much lower as Europe becomes increasing isolated in a banker cocoon.
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hey check this out ....all roads lead to ROME:::
http://rense.com/general92/thit.htm
And some sad, sad, sad news from Tunisia where people are struggling to find food.
This lady had to look for rags to cook dinner for her family of 12
http://www.geenstijl.nl/archives/images/ANP14617836.html
And this boy who is taking a mannequin to help feed all his brothers and sisters...
http://www.geenstijl.nl/archives/images/ANP14617078.html
GUESS whats for diner tonight?
A sad, sad, sad struggle for survival...
Let's just hope this doesn't happen in Algeria or Lybia or brands like Tommy Hillfiger, Prada, Armani, Delvaux... may all be going bankrupt!
Wasn't Tunisia a French colony? Tell France to give the loot back.
The French have received the US memo urging them not to act in this direction, as it would be counterproductive to the US effort to starve part of the world to open up markets.
Please rest assured that with the french president Nicolas Sarkozy, world renowned US boot licker, the danger of the French thwarting the US grand plan to starve the world simply does not exist.
As long as there is a plan...
We'll just ignore the EU biofuels thing.
Same good old US plan...
If we were to apply this same reasoning, how much would the U.S. owe to the rest of teh world?
What former colonies does the US have?
Getting a little too close to home, Spaghetti Boy?
Detroit?
Heh.
If only we could give that dump back.
The thirteen colonies stolen from King Georges the Fifth.
All the land PC named territories (to avoid colony name) stolen from the Indians.
No wonder theft prevails so much in the world when the world is under US world order.
And when one thinks the Chinese are coerced over Taiwan...
Strangely, all our territories seem to want to stay with us voluntarily.
We keep trying to get Puerto Rico to vote itself out, but they just won't go.
Why does Europe get credit for becoming so weak they could not hold their colonies anymore?
China? Bitch, please. Can you say Tibet? They'd be all over Mongolia if they did not know Putin would pull the nuclear trigger on their evil commie asses.
"former" not yet: it still has a lot of de facto colonies, however. Time will tell.
Well maybe if she had stopped after 2-3 kids, she wouldn't have so much trouble feeding her family??? Seriously, unless you're a Saudi prince, how do you support a family of 12?
A wife in that part of the world has little say in the matter. Plus, large families are insurance policies for old age....you know, like social security & defined benefit programs....lol
How can a central bank issue a 'sterilization bill'? What a load of bullshit.
Interest bearing central bank credit would be 'money good', after all non interest bearing central bank credit is 'money'.
I laugh at the fools offloading their gold because they think the Chinese central bank is now being prudent.
1. Distract the media with some very interesting headline news:
translated in (bad)english:
http://babelfish.yahoo.com/translate_url?doit=done&tt=url&intl=1&fr=bf-home&trurl=http%3A%2F%2Fwww.hln.be%2Fhln%2Fnl%2F959%2FBizar%2Farticle%2Fdetail%2F1209175%2F2011%2F01%2F17%2FWie-vindt-dat-politici-goed-bezig-zijn-scheer-je-ballen.dhtml&lp=nl_en&btnTrUrl=Translate
Title says: If you think the politicians are doing well, shave your balls.
What a great initiative... because like we all know much to well is that when you shave your balls, it's like walking with needles in your boxers for the next two weeks. So they say...
Original headline:
http://www.hln.be/hln/nl/959/Bizar/article/detail/1209175/2011/01/17/Wie-vindt-dat-politici-goed-bezig-zijn-scheer-je-ballen.dhtml
2. Just do it!
http://www.originalpurity.net/blog/wp-content/uploads/2010/09/nike-just-do-it.jpg
http://www.smashingapps.com/wp-content/uploads/2008/06/nike-just-do-it.jpg
I had to shave my balls back during the election. All that dipping them in pudding made it mandatory.
"I'm fuckin' discustard!"
Significant fact based non-judgemental research indicates that there is a 93% correlation between politicians shaving their balls and failed Dutch auctions for debt issuance. And what I found interesting was when trying this at home against recommendations to the contrary, the only soothing medium I could find was to letthe dogs lick the raw buggers. In fact, a problem did develop where the pooches got a little carried away thinking they'd arrived at the Third Annual California Pimple and Steak Tartare Festival (with entertainment provided by the fabulous Hansen). It did distract me from bidding in the auction, though.
LOL - 15 year egg shaver here. Words of caution: five o'clock shadow.
I had to do it for my vasectomy.
Hmmmm. Mach III...
...Honey, can I borrow your Daisy?
Do it. she'll love you for it. And go for the Daisy - no sharp corners. My contribution to ZH for the day.
Remainds me of the last Greek syndicated deal just before the wheels came off. In that particular one books were over 25 bn and everybody basically thought it was the deal of a lifetime. Now it's trading roughly double the yield when it was issued. Another interesting little thing is an article in Elpais abt the housing market in Spain. Now that everybody and their grandma's has "the feeling" that european sovereign debt crisis is over this serves as a remainder of the reality outside financial market's current blind faith.
http://www.elpais.com/articulo/portada/vivo/solo/elpeputec/20110116elpepspor_9/Tes
This is looking more and more like 2008....
for INdia , this year has started EXACTLY like 2008...a huge Correction beginning at the very first trading day of the year........
The most questioning part coming from the crisis: how other countries that had to swallow the pill are reacting to the freedoms taken by western countries?
Now Spain is judging that facing market valuation is out of question and prefer to rely on a ring of syndicated banks.
Incredible.
I wonder how all the countries that were forced to take 'harsh' decisions by Europe and the US are reacting when they see that Europe and the US are judging that those 'harsh' decisions should not apply to themselves.
That is the famous rule of law for you. People who coerce others and when the same situation arises for them, suddenly, forget what it should mean.
Why would a person like a US world order when it boils down for rules for every one else but the US and Europe?
Could grow dangerous.
Goodbye Tunis
Hello Madrid
One by one the Zombies waken.
You know pretty soon even the braindead american reality TV addict may awaken,
Yeah hollywood is working on a reality sitcom called
PIMP MY POLITICIAN
Yup it's a show where sleazebag, bent over politicians repent and try to do the right thing only to find they all of sudden have cement shoes...............
How will they escape, willl they escape?? Tune in to find out
A tragic tale of greed and circumstance
only on pimp TV
I still can't understand why after Ireland CB printed its own currency (as reported here on ZH yesterday) why Spain and the rest aren't sending a memo to brussels to do the same . Who needs to borrow money when you can just print it ?
Boroving from any bank IS printing. There is only a question, if we print for free like in Zimbabwe, or like in developed countries, in exchange for some "real assets and obligations".
Until anyone realizes, that this assets are not real, printing is ok.
After anyone realizes that anyone else realized the scam, hyperinflation driven by foreign exchange rates occurs, exactly like in Weimar Germany.
The game is about to inflate all currencies in a synchronized way to avoid first deflation and second hyperinflation. Secrecy is the only way it can be done.
Do we know that they're not? The Spanish government sells the bond to the bank, and the bank creates an entry in the deposit account for the Spanish government. No one is pushing them too hard on reserve levels. It's like auto manufacturers stuffing the dealership with cars. If the Euro gets well, the banks can profitably clear the inventory. If not - they lose money - only to be baled out by Spanish citizens in the next ECB-IMF "save".
No worries. Bonuses are in good shape.
I may be peak of accounting crime:
1) ECB or local central bank creates some "off balance sheet" money
2) lends it to commercial banks at 0%, they book it in some special deposit accounts and claims some welthy foreigners just came into play - names stay disclosed.
3) commercial bank buys bonds with this "real free market debt money", so they are not printing in exchange for nothing - move along, no hyperinflationary brake of rules to see here!
4) this shell game can go many years, until some big disaster happens (collapse of Japan or USA, WW III), "causing" European Crisis II when defaults will be permitted, but hair cat will apply only to this young phantom investors.
5) political and financial content will be prohibited in Internet for "social security reason"
6) financial elite became saved and start buying remainings of industry and middle class assets
7) unwashed became some increase in wages denominated in new world currency, just to make them comply and by more Monsanto "food"
I don’t blame them, as the yield always mysteriously seems to inflate coming up to "un-failed" auctions…it happened with nearly all he Irish auctions; a few days before the auction some nonentity would release a dodgy doom and gloom note from some bank standing to make kazillions and the spreads would go to the moon. Free markets are alright, but free reign to rape sovereign countries is another matter altogether.
Let's stop bemoaning the fate of 'sovereign countries' - all governments are simply criminal syndicates that hold their populations hostage by force. Since when is it something to lament when one gang of criminals wipes out another? The real concern is the collateral damage to civilians. As for the sovereigns - I cheer every time they bleed, and pray they don't discover they have assembled a circular firing squad until it's too late.
Well said!
hey Tyler, just a little bit desperate for a headline? you fail to note the pricing is the same and that this is the same distribution format used in the US. one might even argue that this brings the ECB closer to a euro-bond structure......let's face it, the CDS to da moon trade is dead dead dead.
US Treasury bonds are syndicated? Now that is surprising.
i didn't mean literally. i meant using the banks to (a) spread the risk and (b) spread the fees. either way, it's a moot point b/c they got eur12b in orders at 220bps above comparable US. so, so much for the failed auction theory. and of course it's rigged. until Chanos can convince the Chinese and Abu Dhabi to give him total control over their investing activities, the short the central bank trade is dead on arrival.
2x1 bid to cover, eur6b sold
Tyler...Clicking on links embedded in comments can be dangerous. Whether the commenter knows it or not, some of those links are to sites which try to load a virus, worm or other bad scripts. Threatfire just gave a 'high risk' warning from one. Beware.
Can you share which ones?
there is a few bad scripts on this one...
http://tinyurl.com/lj484m
I'm piecing this together. Silver shortages are spreading due to exploding physical demand with sharp backwardation in prices. PMs were manipulated down last week and followed by increasing short covering by institutional investors. The European debt crisis, despite China's actions last week with Portugal, is spreading as countries now cancel bond auctions outright and take their debt trading out of the public view. The US was unusually gutsy in its disinformation campaign in the last weeks, with 270K jobs added and a declining unemployment rate and all. Ben even upgraded his view of the US economy. There are last ditch efforts everywhere. Something is about to go snap.
Well what blows up first and takes the system down with it?
a) The Euro
b) Fraudclosure gate
c) The Silver Market
d) The Bond Market
Gentlemen, place your bets...
The author is correct in his reporting, something is about to snap in the European markets. For them to now move these sales private tells me also that they don't trust bringing their debt to the open market and are essentially getting a private loan from some or a few banks covered via a bond. I predict in about 2 months Spains economy will implode.