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UniCredit Bank Warns Of Plunge In Sterling And Gilts, As Britain Is Next Country "To Be Pummeled By Investors"

Tyler Durden's picture




 

Kornelius Purps, director of fixed income at Europe's second-largest bank, UniCredit, has issued a stark warning to clients who wish to invest in the Britain: "I am becoming convinced that Great Britain is the next country that is
going to be pummeled by investors.
" Ambrose Evans-Pritchard reports reports that "Mr Purps said the UK had been cushioned at first by low debt levels but the
pace of deterioration has been so extreme that the country can no longer
count on market tolerance" and that "Britain's AAA-rating is highly at risk. The budget deficit is huge at
13pc
of GDP and investors are not happy. The outgoing government is inactive
due to the election. There will have to be absolute cuts in public salaries
or pay, but nobody is talking about that." And everyone was wondering why the U in STUPID stand for UK (actally make that just CNBC, who never really bothered to even read the original definition). So can the whole sovereign default wave skip the PIIS and go straight to the U?

From the Telegraph:

"Sterling is going to fall further over coming months. I am not expecting
a crash of the gilts market but we may see a further rise in spreads of 30
to 50 basis points."

Yields on 10-year gilts have already crept up to 4.14pc, compared to 3.94pc
for Italian bonds, 3.48pc for French bonds, and 3.19pc for German Bunds,
though part of this reflects worries about higher inflation in Britain.

Ian Stannard, currency strategist at BNP Paribas, said markets are fretting
over how the UK will cover its deficit following the pause in quantitative
easing by the Bank of England. The Bank has absorbed £200bn of debt, more
than total Treasury issuance over the last year.

"The UK may have difficulty in attracting extra investors to fill the
gap. We think they will have to do more QE as recovery falters," he
said.

BNP Paribas expects sterling to drop to $1.31 against the dollar this year and
reach parity against the euro despite troubles in Club Med. "We're very
bearish on the UK," he said.

And the biggest insult to the island nation? The insinuation that Greece is actually better off that Britain.

UniCredit said Greece is better placed than the UK in coming months even if
deficits look comparable. "The polls point to a minority government in
the UK, while Greece's government can count on a majority to push austerity
measures through parliament. Secondly, the British tax system offers less
leverage for a rise in revenue," he said.

Paradoxically, Greek tax evasion creates scope for a surge in revenues from
tougher enforcement. "It is not out of the question that we will see a
positive surprise in Greece: is there any such hope for Britain?" said
Mr Purps.

Well Mr. Purps, this means that there is still hope for America. As the still sentient part of the population has decided to show the corrupt administration and the criminals on Wall Street the middle finger and maxed out their withholding exemptions, all it will take is an order from the US politbureau that the Treasury can withhold 100% of every paycheck, and in addition, garnish wages in perpetuity, DCFed at Ben Bernanke's favorite discount rate of -100%.

 

 

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Thu, 03/11/2010 - 21:39 | 262646 bugs_
bugs_'s picture

I think I'll go for a walk.

Thu, 03/11/2010 - 22:10 | 262674 Postal
Postal's picture

I'll join you...

Thu, 03/11/2010 - 21:52 | 262655 ratava
ratava's picture

joey diphard got us covered

Thu, 03/11/2010 - 21:54 | 262657 SteveNYC
SteveNYC's picture

This should be good for a continued 65 degree rally in US stocks.....the detachment from reality continues into perpetuity......

Thu, 03/11/2010 - 22:23 | 262695 Fritz
Fritz's picture

Tomorrow's headlines today...

US Stocks a Safe Haven, DOW/S&P Skyrocket on UK Fears.

Fri, 03/12/2010 - 01:22 | 262885 Al Huxley
Al Huxley's picture

Not to mention the huge increase in demand for high-quality USTs.

Thu, 03/11/2010 - 22:30 | 262709 waterdog
waterdog's picture

The post these last few days has turned me into an obsessive compulsive zombie. I am constantly opening my safe and counting my gold and silver bullion. Then I go to my broker account and verify that I still own oil. Then it is back to my safe to count the gold and silver. Then back to the broker account. I cannot stop. I going insane. This BS has to end. Someone pull the GD plug, hit reset, reboot, I don't care which.

 

Thu, 03/11/2010 - 22:35 | 262720 Bill DeBurgh
Bill DeBurgh's picture

I went to the range today. Lots of .40 into nice little 4" groupings. THEN I counted my gold and silver.

 

Ah, all better now.

Thu, 03/11/2010 - 22:37 | 262723 Fritz
Fritz's picture

Drink heavily.

Thu, 03/11/2010 - 22:39 | 262725 Crummy
Crummy's picture

Wow, me too.

Except I keep making sure I bought the right caliber ammo and running out to make sure I siphoned every last drop of gasoline from my lawnmower.

Thu, 03/11/2010 - 22:50 | 262738 JohnG
JohnG's picture

Take it easy, as it comes, it's the only way.

Get enough sleep to remain rational, and remember that word: RATIONAL.

There is far too much "information" on the web to consume.

Remember, rational analysis.  Seek this.

Stay calm.  All is not well, to be sure.  There is a middle path of sanity however.

 

JG

Fri, 03/12/2010 - 03:51 | 263006 merehuman
merehuman's picture

Am keeping ammo near the bed. My gun aint what it used to be. But the 12 g has a nice ring to it.

 

Fri, 03/12/2010 - 11:17 | 263179 augmister
augmister's picture

Nice rainy weekend here to build another thousand rounds....  

Thu, 03/11/2010 - 22:52 | 262743 Anonymous
Anonymous's picture

Meh. This is just a scam to drive down the Pound. Let's all get in a tizzy over the poor old Brits while those Evil speculators drive down the currency.

And then watch as Britain profits off of increased imports, which they badly need.

Yawn. Same old hoopla, different country.

Fri, 03/12/2010 - 03:39 | 262996 bhagwhan
Fri, 03/12/2010 - 16:04 | 263576 Orly
Orly's picture

I smell Soros...

Thu, 03/11/2010 - 22:58 | 262747 BS Inc.
BS Inc.'s picture

Kornelius Purps

 

DAMN that is a bad-ass name!

Thu, 03/11/2010 - 23:47 | 262798 AR15AU
AR15AU's picture

UK is fine.  QE 6 will be the new MI 6.

Thu, 03/11/2010 - 23:57 | 262809 Anonymous
Anonymous's picture

It is interesting that US will not stop at nothing to keep the treasury debt at low cost. This is just short of declaring a war.

By attacking Euro and present it as shaky will make investors go for "only" safe currency in the world and buy controlling country debt. More investors wanting US debt makes it cheaper to sell more of it.

Extend and pretend

Fri, 03/12/2010 - 01:27 | 262889 Al Huxley
Al Huxley's picture

Indeed.  Extend and pretend as long as the assets affected are primarily non-essential.  When food starts running short, that's when the devaluation game ends and we find out who has real money, and not just a printing press.

Fri, 03/12/2010 - 00:34 | 262844 DavosSherman
DavosSherman's picture

"it will take is an order from the US politbureau that the Treasury can withhold 100% of every paycheck, and in addition, garnish wages in perpetuity, DCFed at Ben Bernanke's favorite discount rate of -100%."

That or they will take the 2-7 trillion in 401K's and IRA's and put them into Social Insecurity II and buy bonds with stupid money.

 

Like Ron Paul says, don't steal the govt. hates competition

Fri, 03/12/2010 - 03:49 | 263004 Anonymous
Anonymous's picture

*lol* they've got QE II running the country for, what, fifty years now? They should be used to it by now and be fine.

Fri, 03/12/2010 - 03:59 | 263009 merehuman
merehuman's picture

we the people are slow to wake up and /or rebel. but surely other countries will not allow themselves to be had as well?

China and russia surely will attempt to benefit and or cause our demise. We are in a precarious state and our enemis are aware of this. Bernanke has exposed us to more danger than he is ready for. He is a traitor as are a few others. I wish we had a LAW . I wish we were a country of LAWS . I wish we had equal justice, but we do not. I wish we had honest currency, but we do not.  I wish we had a truthful media, but we do not. Its not a free press, its a paid for press. many of you know this and more, but remember the folks out there are a little slow, fat , spoiled and dumbed down. They are still our people and its up to us to help save them and us.

Aint nobody coming to our rescue but us.

Fri, 03/12/2010 - 05:39 | 263036 Anton LaVey
Anton LaVey's picture

China and russia surely will attempt to benefit and or cause our demise.

Why would they do such a thing? These are countries with long histories, and they know a large wounded animal is dangerous, and capable of lashing at random.

No, they will just wait. That's all they have to do: they both know this is the twilight of US power. A few more years, or months, or even decades, and the USA won't be a superpower anymore. They have time on their side, and both countries are patient. They can afford to wait.

Russia, in particular, has lots of natural resources, that will always be valuable. China has intelligent, hard-working people, who value education and science, and that will always be valuable as well.

The US will be back on world scene, eventually. But they won't be able to throw their weight around like they are doing now. These are the death throws of the US Empire. Good riddance.

Fri, 03/12/2010 - 11:07 | 263169 Pladizow
Pladizow's picture

With 1.3 billion mouths to feed - America will be China's farmland.

Fri, 03/12/2010 - 08:56 | 263085 John McCloy
John McCloy's picture

+1

The thought of China being capable of destroying us economically has been weighing on me all week. If these nations are so far behind militarily with an ever increasing gap I cannot imagine them not taking advantage of likely the best oppurtunity they will ever have of crippling us. 

* We have the weakest economy since the depression, we are in a second depression, we hve jobs hanging by the thread of a printing press and a nation that has literally purshed itself to the point where continued low rates and QE are exposing our stability. Men like Bernanke do not comprehend warfare tactics and that a blockade is as threatening as a dropped bomb. If I were China I would come out and make a statement that makes a mockery of the U.S. 

Considering how we are embarrassing Japan our 2nd largest debt holder for no reason they may be tempted to stop buying as well. They could topple our reserve currency status and install theirs or at least attempt it.

Fri, 03/12/2010 - 12:30 | 263262 Anonymous
Anonymous's picture

We are embarrassing Japan to blackmail it into buying US treasury bonds. But US T bonds or we cripple your largest exporter, Toyota. Someone has to replace China in this respect. Now interestingly Japan's monetary policy seams to be 'Fire up the printing press.' Hmmm...

Fri, 03/12/2010 - 04:47 | 263022 A Man without Q...
A Man without Qualities's picture

Bond vigilantes will be deterred by the risk of more QE.  This will obviously weaken the currency, but so what and relative to what?   May help exports but will harm those economies reliant on the hordes of lager swilling monsters that head south for the sun.

I don't buy the argument about the Greeks and tax evasion.  The speculators are looking at countries where the fiscal position may be considerably worse that the official statistics - Italy is the leading candidate on that one, but I have a weird feeling that Austria could come out of left field.  I still think the UK is screwed, but it will be the public sector workers and the sensible savers that will suffer the most, not the precious bond holders.

Fri, 03/12/2010 - 09:01 | 263088 reload
reload's picture

I broadly agree with you (A Man  without Q) but I dont see how a bondholder (in this case owner of a UK Gilt edged stock) will escape without similar pain to that of a `sensible saver`. Both get harmed by more QE (currency devaluation). We do need to make the public sector a less attractive place to work, and small businesses more rewarding to own. Business rates (property tax) in the UK has become so onerous that many business owners are convinced that government does not care about their fete at all.

Fri, 03/12/2010 - 08:21 | 263070 Grand Supercycle
Grand Supercycle's picture

 

The EURO rally I warned of has started.

http://www.zerohedge.com/forum/market-outlook-0

Fri, 03/12/2010 - 09:03 | 263089 Orly
Orly's picture

Must be time to sell Euros

 

Fri, 03/12/2010 - 09:26 | 263095 Lux Fiat
Lux Fiat's picture

Unicredit is Italian-based, and was rescued by the Italian Central Bank during the financial crisis.  Some form of support may still be going on, akin to many US-based banks and the Fed.

Hmmm, I wonder if this is a coordinated advance PR effort by Italy to stay off the sovereign debt crisis chopping block, and try to offer up the UK instead.

Fri, 03/12/2010 - 10:30 | 263103 THE DORK OF CORK
THE DORK OF CORK's picture

In defence of the UKs debt postion , The average maturity of its bonds is a impressive 14 years.

Of course that is it really - everything else is horrid but.....

If they can stop building more and more bloody houses and do something constructive with their time then they may have a chance.

Remember the UK once had the most impressive boffin culture on this little planet. Maybe just maybe they can revive the lost art of making things.

Fri, 03/12/2010 - 10:40 | 263145 TruthHunter
TruthHunter's picture

"The post these last few days has turned me into

an obsessive compulsive zombie. I am constantly

opening my safe and counting my gold and silver bullion."  

"I went to the range today. Lots of .40 into nice little 4" groupings."

THEN I counted my gold and silver."

You guys are in a rut.  Lead and Gold aren't going to help if

you make yourself a target.  

Get out of the house.  Go down to a truck

stop and buy a baseball cap.  Then head down to Goodwill and get

a New2U wardrobe.  Hide the MB and buy a 10 year old Chevy Pickup.

By then you should be ready for a drink.  Cross the tracks

and make some new friends.  Practice being small time generous.  All the

heavy metals in the world won't help you much when THEY start going after

the suits.   


Fri, 03/12/2010 - 11:06 | 263168 trav7777
trav7777's picture

Ever wonder why the police are so overpaid?

It's so they really WILL beat their countrymen for protesting austerity.  They know that as long as the government exists and they are part of the Holy Trinity, their checks will keep coming.  Feudal constables were relatively powerful, significantly better-off than a serf.

The police and, to an extent, the military exist to serve the government which is controlled by plutocrats.  It doesn't matter what country you look at, even ones where the leadership INCONTROVERTIBLY took bribes in broad daylight and sold the nation out (Argentina), the police STILL dutifully stood up and gassed, beat, shot, tased, and imprisoned the People who ostensibly are in charge in a Democracy.

The government stood up to protect other members of the government.  Just as surely as those New Orleans cops were ASSISTED by the investigator empowered with investigating their murder of unarmed civilians on a post-Katrina bridge.  The investigator PROVIDED THEM with a drop gun.

Anyone thinking that this won't go the same way here is a fool - it already has.

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mark456's picture

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