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Spain Sells 5 Year Debt At 4.542%
After literally the entire world came together to prevent the collapse of the Eurozone by purchasing Portuguese and Spanish bonds, the Portuguese bond auction yesterday, and Spanish today, were a "smashing success." After three days of direct bond purchasing by the ECB, a direct placement of Portuguese bonds to China, and Japanese purchasing of billions of bonds as well, the market is stunned by the fact that Portugal and Spain did not have bond auction failures. From Bloomberg: "Spain sold 3 billion euros ($3.9 billion) of five-year
bonds, meeting its target, at an average yield of 4.542 percent,
lower than secondary-market yields of 4.630 percent. Italy, the
euro region’s second-most indebted nation, aims to issue as much
as 6 billion euros of debt due in 2015 and 2026 today." Specifically, the bid to cover of 2.1 was a little higher than the 1.6 previously, while the yield surged sequentially from 3.576% to 4.542%, which was followed by the requisite lie by the Spanish finance minister that Spain "definitely" does not need a bailout. The fact that it is being bailed out by three (plus one) central banks is irrelevant. In other words: can has been kicked down for another week or two, and the cost to the global central banking cartel was just a few billion pieces of freshly printed linen.
Some more from Bloomberg:
“The auction went well” today, said Chiara Cremonesi, a fixed income strategist at Unicredit Bank AG in London. “Spain managed to sell at the top of the announced range, attracting stronger demand than in November.”
The gap between Spanish and German borrowing costs narrowed to 235 basis points from 240 basis points yesterday and a euro-era high of 298 basis points on Nov. 30. Spain’s benchmark Ibex 35 stock index gained 2 percent, extending yesterday’s 5.4 percent surge, the biggest since May 10.
“Market participants got so short and nervous ahead of the Portuguese auction that now we’ve probably hit another pocket of breathing space,” said Phyllis Reed, head of fixed-income research at Kleinwort Benson Private Bank in London. “It should make the Spanish auction a bit easier.”
And some more on the details of the EU's can kicking protocol:
European governments are considering aid for Portugal, debt buybacks and lower interest rates on loans from the region’s bailout facility as part of a package to quell the financial crisis, according to two people with direct knowledge of the talks. Euro-area finance ministers will discuss elements of the package next week at a meeting in Brussels. The European Commission is considering a proposal to double the size of the 750 billion-euro bailout fund, Expansion reported today, citing people it didn’t identify.
The Spanish bond market also got support yesterday from Chinese Vice Foreign Minister Fu Ying who said in London that the country has bought Spanish debt and will continue to do so, reiterating comments made last week by Vice Premier Li Keqiang.
Spain’s Socialist government, which faces its first bond redemptions in April, is trying to prove to investors it can slash the region’s third-largest deficit to 6 percent of gross domestic product this year from 9.3 percent in 2010, and shore up its struggling savings banks. The country faces repayments of 15.5 billion euros in April, data compiled by the Treasury show.
Yet somehow the "success" of this entirely prebought auction appear to have taken the market by surprise again, with the EURUSD jumping by nearly 100 pips from 1.3090 at auction time. We wonder if it would have gone to 0.000 had the multi-billion backstop effort failed.
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..of course, all this is for nothing when a substantial portion of MBS are worthless paper
TD, u should dig the dirt in Spain what comes to the off balance sheet debt of the government. That's where we can find the real issues.
Good luck doing that. Not even Spain itself knows whats going on thanks to GS accounting tricks.
And to spread the talks: Even after 1 year of Greece problems, Greece itself still can't present a total picture of it's finances.
Yeah, true. But to the extent there's possible to get info. And the important part is not the central govt. Spain is very decentralised so the lower levels of govt like autonomous communities and municipalities play a big role. Edward Hugh has done good work in his efforts to reveal the extent of the deep hole Spain finds itself in. You can find his blog abt Spain here:
http://spaineconomy.blogspot.com/
And Belgium to avoid Mr Market completely.
"...Unsubstantiated market talk that Belgium is due to launch a new
10-year OLO via syndication next week. No official announcement so far
from the Belgian debt agency, but it is planning to auction OLO issues
on Jan 31. If indeed, it announces a new syndicated bond, it is likely
to cancel the Jan auction...."
...and when they can't pay it back? The hilarity of the can punting.
Less disastreus then expected. Beautifull...
Fact is that now that Commerzbank is doing a capital raise AGAIN, red lights will soon start to light up all across the board pretty soon.
Also KBC, DEXIA, ING are yet again getting into deep shit due to their expore to the PIIGS (plus the fact the banking crisis ruined them but that's yesterday news).
The European answer to them was just marvelous. "They should start doing acquisitions to improve their financial situation".
SO in short: If your broke, BUY STUFF AND EXPAND.
Expansionists know only one solution to their problems: expanding more.
HOW MUCH RISKY BILLIONS CAN THE CHINESE AND JAPANESE CENTRAL BANKS BUY UP TO STAUNCH THE BLEEDING EURO SOVEREIGN DEBT SPIGOT?
If I hear "SUCCESFUL" one more time I am going to puke.....
Week or two??? Good luck with that. I'd be willing to bet most of what I have that week or two is way underestimating it.
A few billion pieces of linen? It wasn't even that expensive. The global banking cartel pays almost nothing to send an electronic pulse from one bank to another. Isn't that all that is necessary to make all the billions "leave" one bank's vault (computer monitor) and "deposit" into another bank's vault (computer monitor). It's the same thing as sending a blast e-mail to every market player in the globe to just keep buying stuff.
Priceless indeed...
United we stand, brother..!
In other words: can has been kicked down for another week or two
I would argue it's a grenade being kicked down the road...
I heard to keep an eye on the Spanish Ten year and if it gets close to 7%, then you have about a month to "get out of paper" as Spain is too big to be bailed out and it will all end in tears.
http://www.bloomberg.com/apps/quote?ticker=GSPG10YR:IND