Spanish €3.88 Billion T-Bill Auction Results: Weak Despite China Support

Tyler Durden's picture

One look at the overnight EURUSD chart shows a straight vertical line up earlier in the session (at least before an almost comparable and equal line straight down following the Portugal action by Moody's), which was driven by news that Chinese vice premier Wang Qishan expressed his support for EU efforts to ensure financial stability. Yet the biggest indicator of just how bad sentiment in Europe continues to be, China support or not, are the results from the Spanish T-Bill auction. And after auctioning €3.88 billion in 3 and 6 Month T-Bills off earlier today, the yields rose once again to record highs. The 3-month T-Bill auction for €3Bln came at a bid to cover 2.14 vs. Prev. 2.34, at a yield 1.804% vs. 1.743% previously. Just as disappointing the 6-month T-Bill for €0.88bln, came at a bid to cover of 5.15 vs. 2.65 previously, importantly at a yield of 2.597% vs. Prev. 2.111%. In other words, despite billions of ECB sovereign bond purchasing, and despite the recent shift in sentiment that Europe is not in free fall, arrested after Reuters spread false rumors that the IMF would bail out Europe, things are once again turning ugly for the continent, as there is no way that a country can sustain its funding needs when the 3 Month cost of credit is at such a huge differential over 3M Euribor, which today clocked at 1.022%. If not even the arbs, who are the only ones left active in this market, want to put the compression trade between unsecured and sovereign debt, then there is little reason to be optimistic.

Some more on the auction from Bloomberg:

Spain sold 3.88 billion euros ($5.1 billion) of three- and six-month Treasury bills, near the maximum target, as borrowing costs rose amid lingering concern the nation will struggle to fund its deficit.

The Treasury auctioned 3 billion euros of 84-day bills at an average yield of 1.804 percent, the Bank of Spain said today in Madrid. That compares with 1.743 percent when the securities were last issued on Nov. 23. The government sold 876.7 million euros of 175-day debt at 2.597 percent, up from 2.111 percent last month. It aimed to sell a maximum of 4 billion euros from the two sales.
The rising borrowing costs remain “in line” with what the Treasury estimated at the start of the year, Deputy Finance Minister Carlos Ocana said today as he released data showing the central government’s budget deficit narrowed 46 percent from a year earlier in the first 11 months of the year, to 3.68 percent of gross domestic product. The central government targeted a full-year shortfall of 6.7 percent.

The overall Spanish budget-deficit target of 9.3 percent will be met this year as the better-than-targeted central government result offsets possible slippage in local administrations or the social-security system, he told a news conference in Madrid.

The yield on Spanish 10-year bonds rose four basis points to 5.57 percent at 11:03 a.m. in London. The difference in yield, or spread, between the securities and benchmark German bunds rose four basis points to 257 basis points, compared with a euro-era high of 298 basis points on Nov. 30


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eigenvalue's picture

 T-Bill for €0.88bln, came at a bid to cover of 5.15 vs. 2.65 previously?

A bid-to-cover ratio of 5.15?Is it a typo?

Oh regional Indian's picture

Wow! I just realized that a weak Euro helps China buy Europe on the cheap. Not just bonds. Europe. Like Japan did to the US in the 80's.

Shift of the locus of the world?

i think so.


eigenvalue's picture

China has its own internal problems and will collapse in a far worse way than Japan.

Oh regional Indian's picture

They could end up owning large swathes of Europe on their way down.


taraxias's picture

A cheap euro hurts China's exports to Europe and that's all the Chinese care about at the moment. They stepped in with some "feel good news" during the Greek crisis, they are now doing the same with Portugal. Nothing new here.......

sabra1's picture

seems too, that euro stocks aren't allowed to fall either!

Dick Darlington's picture

That's correct, unbelievable levitation. Total ignorance to everything. But that's usually the case anyway in equity world. ;-) IBEX35 has rallied almost 10% in december... Only word that comes to mind is "retard".

Cdad's picture

Well, well...and the party in Europe continues.  You know, what with all the Japanese intervention on Mrs. Yen, you would think someone would set up one of those interventions for little Miss Euro because that chick is whacked...hacking out all those mojitos at 2:00 and now slamming a bunch more mojitos at 7:00.  The skank has been partying all night!  Good grief.

At this point, someone should just take little Miss Euro by the hand, and take her for a ride down to rehab...because if you are at all like me, ummmmm this Miss Euro stuff is starting to look totally bizarre. 

Oh, and about China...seriously?  China is going to save the US economy by....importing copper or something...and now the China is going to save Europe by buying drinks for little Miss Euro...TOO?  As they say, "I was born at night...just not last night."

Good grief.

Rodent Freikorps's picture
"If I had a world of my own, everything would be nonsense. Nothing would be what it is, because everything would be what it isn't. And contrary wise, what is, it wouldn't be. And what it wouldn't be, it would. You see?
— The Mad Hatter"
Lewis Carroll (Alice's Adventures in Wonderland & Through the Looking-Glass)
papaswamp's picture

It's amazing...countries are accepting any rates thinking someone will bail them out....or they know they will default.

cunningtrader's picture

Well, who gives a shit...the IBEX35 is rallying it's arse off.

firstdivision's picture

Spain is going to have serious issues in Q1 2011.  The bond vigilantes have been circling and are now descending to feast once the rest of the world realizes that Spain is as dead as roadkill.


I am really enjoying the action with crude.  It is like there is a magical mallet that hammers it every time it reaches for $90.  Also, the action in the gold/silver market are getting the viagra treatment.  My daily amusement is watching the Fed mandate walk the tightrope that is propping markets and suppress commodities/metals. 

Cdad's picture


I agree about the "magic mallet."  I also really believe that oil is priced for stupid.

Listen, even the criminal syndicate Wall Street banker that was just talking with Joe Kernen on The Blow Horn [CNBC] could not hide the fact that oil is priced for stupid because US demand is so freakin' busted....and probably will remain so for years.  Said banker tried to go with "oil is up because of uncle China" which is such a tired phrase that EVEN JOE KERNEN called him out on "hot money" and "Goldman backwardizing things."  EVEN JOE KERNEN COULD SEE THAT NONSENSE...and so that is like a neon light being hung on your magic mallet, if you know what I mean.

So when it comes to oil, I continue to believe that oil is simply priced for stupid is....and I am backed up by the fact that EVEN JOE KERNEN knows it.'s picture

China is smart, why invest their surplus of holdings in the US and by extension supporting the us military? There is three pillars of power, economic, political and miltary. Eu´s lack of military cohesion and command structure might prove to be a good thing going forward... I think China will let the US continue with their chicken race, china will curbe inflation by relocating capital to europe, it will be a good way of sterilazing inflation through purchases of the coming Euro-bonds......

When this trade becomes more visual going forward, capital will start looking at the US instead of Europe.


George Costanza's picture

European sovereigns are very unhealthy, but their stock markets continue to move higher.  That tells me they are doing, or will do, their own QE, which obviously is very good for equities.  For now, the sovereign debt does not matter, nor does unemployment for that matter.  For now.

buzzard beak's picture

The Chinese politburo smart? You've got to be kidding me. They're a bunch of thugs driven by hoarding instinct. And what did they hoard? Way more claims to more future earnings than all those lazy-fat-ass Americans could ever pay off without diluting them down through QE, as they're already doing. Nice way to blow a trillion dollars. Yup, that was real smart.

And so now they're going to buy Spanish bonds instead? Yeah, we've got some real geniuses at work here.

dwdollar's picture

No shit.  The Chinese could have bought a super power military to rival the US for a trillion dollars.  Instead, they're going to have a bunch of worthless paper, if they're lucky.  The Chinese are geniuses at producing cheap knock offs but I doubt they have the aptitude to lead.  That's why the Western elite love them so much.