Spain Sells 3 Year Bonds At 3.717%, 119 bps Higher Than Prior Auction

For a demonstration of the unsustainable course that European sovereign funding is on, look no further than Spain, where earlier the government auctioned off €2.468 billion in three year notes for a whopping 3.717%. The bid to cover was 2.27 compared to 2.16 in October, and it was reported that foreign buyers bid above 60% of the auction (which means the ECB funded domestic banks bought about 40%). However, the same issued priced at 2.527% at the last
sale on Oct. 7, a 119 bps difference. Still it wasn't all bad, considering the bond had traded at almost 4% in recent days. As Reuters reports: "Analysts and bond market players had predicted a leap of as
much as 2 percentage points in yields, but Madrid's situation
has been helped by mounting expectations the European Central
Bank will step up extraordinary measures to contain the crisis." The problem for Spain is that it has minimized the amount of debt it is issuing during turbulent times: "The Treasury had cut the amount of bonds on offer in order
to trim financing costs as it faces down market doubts on
whether it can bring down its deficit due to sluggish economic
growth and persistent concerns it might need to bailout its
debt-laden banks." And the problem for the ECB is that it most likely, as many analysts are predicting, will not announce anything of substance, as otherwise the ECB will have to monetize up to €1.5 trillion in total debt and interest through the end of 2011. The result for the EUR will inevitably be disastrous in either case, and if in 25 minutes JCT indeed announces nothing, look for all those who bid up the bond auction earlier to be tearing out their hair as the 3 Year promptly passes 4%.

Comments

[hugovanderbubble]

The problem in spain has a name... Corruption between banks and Banco de España with the Bundesbank +(EBC) approval. 

"Real Estate valuations are all false vs mark to market, there are no real Real Estate Market deals" . Audits and Realtors are playing with banks in  order to not drop prices...meanwhile ...speed money (V´s Irving Fisher parameter tends to Zero...cos banks restrict credit/loans programs schedule to Small and Mid Entities"

whole world, knows spanish stress test has been conducted to earn time and are completly manipulated to show the stats that THEY want to share as good one to go ahead, but internally...the bad stuff has been cleaned, and the dead smells bad....

*Local  Dirección General del Tesoro - force Spanish and foreign market makers to place bids in this unreal auctions to show the world our bid/cover ratio > 2 times...but is just a trap. Time will show everyone.

In my humble house this is deflationary ,that why 10yrs Eur Bond- must aim to hit 2-2,20%

Regards,

[BobPaulson]

You know what this is like? You'd think we'd have learned but this is exactly like when they tried to improve "development" in Africa by lending them tonnes of money, with rates that went of faster that those of a Vegas loanshark. The principal and rate just keep going up until the lender succeeds in sucking every penny of production out of you.

[jmc8888]

Spain is toast.  They will bring down the Queen's still functioning empire, the Inter-Alpha group.

Santander/Barclays/RBS = fucked

Bye Bye Genocidal British crown

Of course the Queen will try to bail them out before all the money is up.  Portugal, you're fucked.