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UST-Bund Spread At Three Year Wides As ECB Warns IMF Involvement Would Be Beginning Of End For Eurozone
The spread between the 10 Year and the Bund has surged today to a 3 year wide. After hitting an intraday slide of 14 bps (a massive move in a world in which each basis point is leveraged thousands of times), the UST-BUND is now at 73 bps. The risk aversion trade in Europe has made 10 year Geman bonds yield just over 3%, even as the near-failed 5 Year auction in the US has spooked the bond market, and an unexpected drill has forced the Primary Dealers out of hiding and into purchasing everything past 5 years to prevent a full out rout in bonds. And all this is occurring as the ECB just warned that IMF involvement in the overhyped and two-month delayed Greek bailout will be the beginning of the end for the euro and will throw the Eurozone's economy, "which has shown fresh signs
of recovery, into renewed turmoil."
A chart of the intraday spread
A longer-term perspective shows that more divergence may be in the works.
And meanwhile in Euroland, courtesy of Market News:
European Central Bank Executive Board member
Lorenzo Bini Smaghi Wednesday starkly warned Eurozone leaders that they
must agree on aid for Greece and not let the International Monetary Fund
do the job for them.
Their failure on this score could undermine the monetary stability
of the Eurozone and throw the real economy, which has shown fresh signs
of recovery, into renewed turmoil, he said.
Bini Smaghi's views roughly reflect previously issued comments by
other Council members but are much more assertive. The ECB's new tough
stance, however, may come too late, as Berlin appears set on an IMF
involvement and is slowly winning Paris over.
On the eve of the summit of EU leaders in Brussels tomorrow, Bini
Smaghi threw down the gauntlet. "Those who are interested in economic
and monetary stability in Europe should resist the path to the IMF," he
said.
Were the IMF to get involved, "then the image of the euro would be
that of a currency that is only able to survive with the support of an
international organization," he warned.
Sorry, Bini, it is too late. Bernanke is already on top of it and about to spend another couple hundred billion to bail out Europe, just like he did at the peak of the crisis.
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Bini = Italian? Makes a lot of sense he doesn't want the IMF in. His country might be next and of course he prefers fresh German euros over IMF involvement. I am sure the Spaniards and the Portuguese will support mr Smaghi.
The US bailing out Greece via the IMF is yet more dollars thrown into a vortex. And it wont save the Euro. Its just a matter of time.
Peak credit has been and gone , more debt is only making matters worse.
The paradox of thrift.... Jacking up risk assets is not going to change the velocity of money. The printing press will have to suck in all the paper and electricity in the World to change the status quo (which is DEFLATION)
Heli Beni is barely causing the string he is pushing on to wrinkle.
The hyperinflationistic goldbugs amongst you would do well to realise should you be proven right, we will be approaching WW3 , so Cui bono? Certainly not you polishing your frankly relatively worthless amount of Bullion. Its all rather insignificant if youre proven right. Spend that money now by moving to a remote part of the World if you genuinely believe a hyperinflationary currence collapse is coming. Unless youre part of the financial Illuminatai holding that gold in a vault just for you and your buddies , its a complete waste of time and effort because you're not going to do any better with it than if you had gone and spent it on a 4X4 and some home improvements.
The IMF doesn't just throw money at countries. There are strings attached to every penny. They tighten monetary policy and slash fiscal policy. Look at Latvia as an example of IMF involvement. Lots of pain for the people on the ground floor.
The US will force an IMF bailout so that interest rates go down. This way the US feels less pain at auction. Nothing else matters at all.
The IMF provide a sphere of influence for the US - its a political measure not an economic one. US taxpayers are not just paying for wars to secure energy in the Middle East , they are paying for interference in sovereign states who do not have access to the Heli Beni printing press.
I am not saying its a bad thing. When you run an empire , you either expand or die. The British Empire were smart - when they realised they were done they moved into diplomacy and still maintain more leverage on the World than many realise. The US will ultimately follow that path , but right now might is right and the US will double down until a bigger bully or group of bullies forces them to back down. At that point we likely see an intensification of global conflicts. Russia and China are jostling for an attempt to write history but neither have the balls , especially the stronger bully which is obviously China. Theyre playing the slow game and will wait and wait. Russia in the meantime is likely going to get burnt another half dozen times until China eventually owns half the place......and then things get interesting.
The US isn't doing this to save the euro, but to bust the EU. There goes the biggest threat to USD hegemony.
Don't worry about goldbugs, you should be sweating your equity postions.
Amen.
Expand the USD bloc at the expense of the Eurozone.
Justifies the money printing.
My fellow investor , as a store of wealth you are better off becomming a property expert than taking the path of least resitance and hiding in gold - equities are going to fail but if they fail as a result of a collapse in the dollar , then we succumb to such a societal breakdown you will have wasted the last few good years of your life worrying about storing a pointless amount of wealth whilst the Armageddon steamroller marches over you.
Work it out.
Interesting points equity_momo,
so what's your plan?
Epic fail.
War! Huh. What is it good for?
Destroying one's creditors.
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Benanke-an! What is best in life!?!
Benanke-an:
to crush your creditors
see them bankrupted before you
and to hear the lamentation of the bondholders
+1
This all reminds me of the scene in the first Alien movie where they're eating just before all hell breaks loose..
+10
The ECB warning that IMF involvement dooms the Euro?
They've already done one right bloody brilliant job of it themselves! Brilliant. Bloody Brilliant!
The incompetent to be led to slaughter by the inane whilst assigning blame amongst the uninvolved.
God! This is just sooooo fucking inane!
The ECB being bailed out by the IMF. The sanctimonious pricks deserve one another.
You guys laughed at me weeks ago, but it proves that Europe is the dumbest country on the continent.
And who bails out Uncle Sam. He's in just as bad of shape, he can just hide it better.
I hope this is deliberately ironic...
I'm sure it is. Europe is trying to act like a country and maintain a single currency without actually being a country, having a shared culture, or having a robust political structure to hold its "country" together.
Europe like a big pretend polygamist marriage, only half the wives have now lost their jobs and are flat broke and need money to feed their methamphetamine addiction while the husband's wallet is getting close to empty and his bills are mounting and they never had any kind of wedding vows in the first place.
Not exactly the kind of marriage that's made to last ...
Kind of like China, trying to do State Capitalisim without a Free Market.
+100
Bingo!
That's why it's a tweaker economy
or la piste noire
http://www.youtube.com/watch?v=JkjhETjstwU&feature=related
Smaghi demonstrates perspicacity and prescience. The IMF is nominally administered by the client-state of Japan and China, US; so would IMF administer insolvent Eurozone states, then should Japan and China administer the Eurozone. Too, Japan and China hold the most US treasuries, asset denominated in dollars; so both have interest in increasing the dollar's value while at same time decreasing the Euro's. In turn, Dollar's rise against Euro both diminishes the Eurozone's economy's size while at same time destroying Euro as competitor. Therefore, Japan and China should use a powerful dollar to subjugate Europe.
Great observation!
What have China, Japan, the IMF have in common?
Long of gobs and gobs, oodles and oodles, bunches and bunches of US Treasuries to liquidate to finance the bailout!
But hold on! There's more!
What do they buy after they sell the Treasuries? Uh. Um. Ah. Well. Oh.....
They buy the whole of Europe after stabilisation if this place collapses into WW3.
Pride. Who needs pride when trillions are involved? Pawn that crap off!
The German ten-year bond trades @ 3.08% yield and the same US bond @ 3.83% and the Euro gets sold due to high risk??
Something does not add up.
The Bund speaks for Germany only. What you get for the PIGS?
"UST-Bund Spread At Three Year Wides..."
Maybe it's the adolescent in me but I just love the words "Bund Spread" along with the image of various Ponzi promoters bent over with their "Bunds Spread" getting what they deserve.
OK, back to my old age. :>)
What they want is sekret IMF (USA) bailout so they can still hold their heads up.
Mene, Mene, Tekel, Upharsin
I don't think the Iranians have a scale any more... they put all their wealth in UF6 centrifuges...
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