This page has been archived and commenting is disabled.
Spain, Italy And Korea Default Risk Spikes By More Than 20%
Libor is now at 0.53%, eurodollars are plunging, new Fed-ECB rescue facilities are rumored to be imminent, Germany is set to introduce a ban on naked shorting of all stocks, and sovereign risk is exploding: it will be a fun day. Spain, Italy and Korea are all more than 20% wider on the day, as the contagion virus is spreading faster and faster toward the heart of Europe.
»
- 4872 reads
- Printer-friendly version
- Send to friend
- advertisements -
How many times have we thought today would be the day the markets fall, only to see the selling die 90 minutes in and then the normal market forces (no-volume melt up) take over.
I'm not holding my breath that today will be any different. As long as the Fed can create money out of nothing and move it to JPM, well.....enough said.
I have a hard time arguing with that.
At which tim exactly will the FED transfer the PPT funds to J.P. Morgan so I can adjust my algos for the liquidity "input"??? :=)))
Seems at 12:45...Thank you PPT. You made my day !
We have fallen 170 in SP's in the past month.......the bottom can't fall out every day!
Gazprom? So our oligarchs are crushing their oligarchs? No honor among thieves.
how the HELL is a company like GAZPROM so likely to default ...can any body explain if theres any problem with it???
because noone can harass them into not defaulting? in putin russia, strategic default declares you.
IMHO; just following the movement in Russia's debt insurance, which has skyrocketed this AM. Also, Ukraine CDS widening is also not very helpful. The contagion is spreading and Italian, Spanish and Portuguese banks have all seen their CDS widening this AM by more than 10%. Its a bloodbath out there; also, EUR is down over 400 pips in the matter of hours. 10y and 30y exploding, DXY also, Gold up almost 24 bucks in 2 days. Libor and TED also up significantly, Libor-OIS ditto. Its scary out there, and index futures are not helping.
Russia has serious currency issues. The Black Swan could fly from there quite easily.
Cheeky, is it ridiculous of me to speculate that credit default swaps, which can be written ad infinitum without capital reserves or price transparency could simply be an effective way of driving up yields on bonds before you buy them? I mean, if the same company that is writing the swaps is planning on buying the bond issue, isn't that just a form of arbitrage?
It is; but why would you expose yourself to that risk in this sort of environment; it makes no sense; unless you hedge the whole thing by buying from another counterparty the same notional amount in swaps. Shit, it does make sense, but you have to calculate the cost of that trade; which would not be small; also the counterparty risk; your own risk; and for what; just to buy some bonds on the cheap. Not worth it.
But if you are confident that the issue will be good, i.e. korean ten year, and your insurance division writes the swaps for the investment banking division, you are both the party and counterparty, it's risk free as long as your Ibank division doesn't sell the CDS out on the open market. Just creating and selling them drives yields in 3 ways (I think)
1. Insurance company shorts the item to hedge its loss on the CDS driving yields up.
2. CDS "spikes" result in credit downgrades, and higher yields result.
3. Increased cost of borrowing due to interest rate hike drives yields further.
To add to a good post by Cheeky Bastard - Gazprom just has too much outstanding public debt on the market. Russia itself has about 30B in USD/EUR-denominated bonds, Gazprom - somewhere in the range of 40-50B.
The FED's not creating enough, they carn't,
its being debt vaporised as soon as its coming off the press.
Have you seen the sovereigns; even more uglier of a picture than this.
Between the TED spread moving on up, LIBOR's latest reset, and the insanity we're seeing in the credit markets, I'm shocked that we haven't had Dick Fuld trotted out on Bubblevision to calm the markets down.
Just like the old days.
Is this a joke about the ban on shorting on all stocks?!
You got a link for that?
Naked shorts
http://www.zerohedge.com/article/germany-ban-short-selling-midnight
spain sold 3 & 6 month bills - yield on 6-month euro notes was 1.26% compared with prior of 0.74%.
EMI as in the racketeers, umm i mean music producers? that sure warmed my pirate heart.
NAKED SHORTS VERBOTEN!:
http://williambanzai7.blogspot.com/2010/05/shorts-verboten.html
that's hot!
I was looking for a bounce to sell...possibly the 200 dma but then again so were a lot of folks...I wonder if the more people look for that bounce to sell it'll just keep plunging
So S. Korea may be going to war.. and Spain is worse than that.
So if Spain invades Portugal does their CDS improve?
would Nevada's CDS improve if they invaded California?
Why in god's name would Nevada want California?
+100