- Prepare for Lehmans (sic) re-run, Bank official warns (Telegraph)
- Fed Seen Extending Operation Twist While Avoiding Bond Buying (Bloomberg)
- US Watchdog Hits at ‘Risky’ London (FT)
- G20 Bid to Cut Cost of Euro Borrowing (FT)
- Romney Says Rubio Being Examined as Possible Running Mate (Bloomberg)
- Hollande Says Worth Exploring ESM Bond Buys (Reuters)
- US Upbeat After Eurozone Debt Crisis Talks (FT)
- BOJ Members Say Japan Could Be ‘Adversely Affected’ by Europe (Bloomberg)
- China Steps Said to Grow Bond Market, Add Issuer Scrutiny (Bloomberg)
- How Asia Will Fare if Europe Cracks (WSJ)
Two days ago, when noting that Italy is on collision course with technical insolvency should its bonds remain at current levels for even one more week, we wrote that "As Italy Hints Of Subordination, Did Rome Just Request A "Semi" Bailout?" Of course, yesterday's big market moving rumor was just this - namely that "supposedly" Germany had agreed to provide the underfunded EFSF and non-existent ESM as ECB SMP replacement vehicles, and implicitly to launch the bailout of not only Spain but also Italy. This turned out to be patently untrue, as we expected, despite speculation having been accepted as fact by various UK newspaper and having taken Europe by a storm of false hope, leading peripheral spreads modestly tighter (and Germany naturally wider). Of course, even if Merkel were to allow the ESM/EFSF to effectively replace the ECB secondary market bond buying, which is what this is all about, nothing will be fixed, and in fact it would lead to even more subordination and more bond selling off of positions which are not held by the ECB or ESM. But that is for the market to digest in 4-6 weeks as it appears nobody still understands how the mechanics of the flawed European rescue mechanism works. In the meantime, now that Italy has tipped its hand, it has only one option: to push full bore demanding that someone, anyone out there buy its bonds. Sadly, Germany just said nein. Again.
“We fear a programmed strangling.”
For the second time in a few short months we are amazed to learn that beggars can be choosers. The Greek pseudo-coalition between ND, Pasok, which promptly determined it would only be part of a coalition if Syriza joined, then even promptlier completely forget what it had said hours ago after Syriza said "no way, Jose", and some other party with the word "Democracy" in its name, are in deep discussions over what conditions they should give Europe in exchange for a coalition government. That's right: the Greek coalition government is debating over a set of demands to hand over to Europe in order to form a government which will last at most weeks.
Nobody could have possibly foreseen that the Guardian was literally pulling BS out of its ass:
- GERMAN GOVERNMENT OFFICIAL SAYS THERE WAS NO DISCUSSION TO BUY BONDS OF CRISIS HIT MEMBERS AT THE G-20 MEETING - RTRS
Have fun with this lunatic, patently fake news driven shitshow that the "market" has become. We are out.
It has been a while since the Guardian came up with a European "bailout" rumor. Time to change that. In a nutshell: Germany will somehow allow a fund, the ESM, which does not yet even exist, overturn the primary principle of the Eurozone, the no sovereign bailout clause, and use money which has not been funded, to subordinate bondholders across the entire continent (because ESM is priming) and serve as an additional secured lender in addition to the ECB... In other words, the ESM will take place of the ECB's SMP. With the only difference that the ECB can print money, while the unfunded ESM will at best rely on the murky details of repo lending. Same subordination either way, of course.
After a volatile morning’s trade, European equities are making gains. Having progressed through the session, markets saw a distinct period of volatility wherein peripheral 10-yr government bond yield spreads tightened markedly with their German counterpart, with the Spanish 10-yr yield making a test, but stopping short of a break below the 7.00% handle. The moves came in the wake of a relatively smooth Spanish T-Bill auction, which saw decent bid/cover ratios albeit with markedly higher yields on their 12- and 18-month lines. A modest relief rally was also observed when markets received confirmation that a recent ruling from the top German court regarding information on the ESM’s configuration does not bar the fund from coming into action and taking effect. In terms of data, markets have shrugged off a particularly poor ZEW survey from Germany, however a substantial weakening was observed in GBP following the release of the first deflationary May reading of CPI since records began. The pullback in cost-push inflation has given markets further reason to believe the BoE may conduct additional QE, as the price-level pressures have eased across the past two months.
Leading all others “by the nose through the ring.”
From Deutsche Bank, below is a list of key events to watch over the next several weeks – events that could have bearing on how the euro sovereign debt crisis evolves. Of particular note: in the next 6 weeks there are 18 or so days on which Spain, Italy or, yes, Greece will be issuing debt. Have that espresso machine ready.
Gold took a tumble for the first time in 7 sessions in Asia as Antonis Samaras, leader of the Greece's New Democracy Party (pro-bailout) was victorious. Today, Samaras plans to form a coalition with other parties backing the bailout – meaning that Greece’s future in the euro is secure – for now. Gold’s dip in Asia was thought to be due to profit taking and increased risk appetite after the Greek election. However, this increase in risk appetite has been quite short lived with Spanish and Italian 10 year bonds again coming under pressure resulting in record Spanish yields over 7.13% and Italian 10 year over 6% again. Initial gains in equity markets have subsided and the lessening of risk appetite is seeing gold supported. Greece’s exit from the Eurozone is no longer a short term risk however it remains a real risk as does the risk of financial contagion in the Eurozone due to insolvent banks in Spain, Italy and France.
As Syriza Concedes Defeat, EURUSD Forgets To Soar - Is A Spanish "Bail Out" Market Response In The Works?Submitted by Tyler Durden on 06/17/2012 17:31 -0400
In a perilous replay of the Spanish bank "bailout", the proxy for bailout sentiment, the EURUSD pair, was up 61 pips to just under 1.2700... and that's it. Naturally, if the world suddenly thought Europe was "fixed", Spain notwithstanding, one would imagine the reaction by the FX market would be just a little more invigorated than merely confirming that what is playing out (namely the lack of a definitive Greek government) has already been priced in. And yet here we are...
While everyone is focusing on Greece, we have news from France:
- FRENCH SOCIALISTS WIN ABSOLUTE MAJORITY IN PARLIAMENT, CSA SAYS
- FRENCH SOCIALISTS WON 320 SEATS, CSA SAYS; MAJORITY IS 289
- FRENCH SOCIALISTS WON'T NEED TO RELY ON LEFT FRONT, GREENS: CSA
So... does that mean that the recently reduced minimum retirement age wil be cut again, thank you Germany?
Four months before the election. And yet, a horrendous migration across the Pacific