- With big conditions, China Offers $43 Billion for IMF Crisis War Chest (Reuters)... US offers $0.00
- Mexico is not Spain: Mexican Yields Drop to Record as Spain’s Borrowing Costs Soar (Bloomberg)
- And live from Las Ventanas al Paraiso: G-20 Leaders Focus on Banks as Spain's Woes Challenge Merkel (Bloomberg)
- German Constitutional Court Gives Victory to Opposition in ESM Suit (WSJ)
- EU Europe’s Leaders Urged to Resolve Crisis (FT)
- Backing Grows for One EU Bank Supervisor (FT)
- Greek Leaders Close to Coalition, Aim to Ease Bailout (Reuters)
- China Economy Improves in June, Commerce Minister Chen Says (Bloomberg)
- China Looks for Loan Boost (WSJ)
Spain Sells 1 Year Bills At Record Post-Euro Yield, ING Says Spain To Need €250 Billion More; German ZEW ImplodesSubmitted by Tyler Durden on 06/19/2012 07:02 -0400
In a meaningless "test" of investor appetite for Spain's Thursday issuance of 2, 3 and 5 years bonds, Spain today sold €3.04 billion in 12 and 18 month bills, well inside the LTRO maturity, and completely meaningless from a risk perspective - after all even Greece is issuing Bills. Yet for some reason the market which continues to be dumber by the day, somehow took the "successful" auction as an indication that there is actual demand for standalone Spanish subordinated debt. And what a 'success' it was: €2.4 billion in 12 month Bills were sold at 5.074%, the highest since at least 2003 and possibly on record. This is more than 2% greater than the same such auction at the end of May. In other words, Spain just locked in absolutely unsustainable 1 year rates. It also sold €639 million of 18 month paper at 5.107% compared to 3.302% less than a month ago. The good news: bids to cover for the two maturities, from 1.8 and 3.2, to 2.2 and 4.4 respectively. And of course they would: Spanish banks found what little LTRO cash they had lying around and in act of total desperation tried to do a carry trade whereby 3 year paper priced at 1% is used to buy 1 year paper yielding 5%.
That Italy is now at most days away from technical insolvency is not news: after all we reported on just this a week ago, citing not some fringe lunatics but Bloomberg economist David Powell who said that "Italy would probably be forced into receiving a bailout if it were to face another two weeks like the last seven days." This was a week ago... so one more week left, and things have not only not gotten better, they have gotten much worse. Which is why we were not very surprised to read the following just released news from Reuters: "Italy will push this week at a meeting of euro zone finance ministers for a semi-automatic mechanism involving the European Central Bank or the permanent bailout fund ESM to reduce spreads of euro zone bonds over Germany, Italy's European Affairs Minister Enzo Moavero said on Monday." Having done this for a while, we can tell Italy what the bond market, having perused the above sentence, just read: "semi-bailout." Because if Italy is implicitly demanding assistance from the ECB, and the Spanish bailout vehicle, the ESM, then things are about to hit the country with the €1.25 trillion in debt. It is all downhill from there. Oh, and here is what the bond market reads when they see ESM: "not so semi-subordination." Because if in Europe the idiotic plan to avoid a bank run is to announce preparations for one, followed by furious back pedaling, it is only logical (and we use the term loosely) that an attempt to avert a bailout will be pursued by requesting a semi version. Instead, that action always and only leads to one thing: waving the sellers right in.
Any hopes that Germany may bend and allow Greece a little leeway in its bailout negotiations, buying at least a little goodwill with its people have just been dashed. Not only that, but readers may recall last week's Die Zeit article that a third Greek bailout may be in the workd. Well, forget it. From Reuters:
- GERMANY'S MERKEL SAYS CANNOT ACCEPT ANY LOOSENING OF AGREED REFORM PLEDGES IN GREECE AFTER ELECTION
- MERKEL SAYS DOES NOT SEE ANY REASON TO SPEAK ABOUT A NEW AID PACKAGE FOR GREECE ON TOP OF THE TWO ALREADY AGREED
- GERMANY'S MERKEL EXPECTS QUICK FORMATION OF NEW AND STABLE GOVERNMENT IN GREECE
Good luck with that, and good luck to everyone whose entire investing strategy is based on the assumption that Germany will blink when it comes to Greece.
Will the DOJ Investigate if JP Morgan Used LCH.Clearnet As a Front to Tank MF Global and Take Customer Money?Submitted by EB on 06/18/2012 09:35 -0400
LCH under investigation by Holder under antitrust statutes. And just who was the ultimate counterparty to the Corzine trade?
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.
- Greek radical leftist SYRIZA leader Tsipras says will not join coalition government (as expected)
- Egypt Islamists claim presidency as army tightens grip (Reuters)
- French Socialists vow reforms after big poll win (Reuters)
- Greeks Back European Bailout (WSJ)
- France, Socialists Win a Solid Majority (WSJ)
- Denmark Warns over Pressure on Krone (FT)
- Obama to press Putin on Syria at G20 amid skepticism (Reuters)... Putin to smile
- China Home Prices Fall in Record No. of Cities (Bloomberg)
- Europe Gets Emerging Market Crisis Ultimatum As G-20 Meet (Bloomberg)
- Wolfgang Münchau – What Happens if Angela Merkel Does Get Her Way (FT)
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 else is focusing on the Greek elections, the REAL issues pertaining to the EU (namely where the funding for Spain’s bailout as well as future bailouts will come from) continues to be ignored. Indeed, no one seems to be asking THE key question regarding the EU: Just WHERE is the money for this bailout going to come from?
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?
Coming into the weekend, most were focusing on key events coming out of Greece and France, possibly Egypt, but nobody expected that Saudi Arabia would be thrown into the fray. That just happened, however, following news that Saudi Arabia's Crown Prince Nayef bin Abdulaziz al-Saud has died in Geneva, according to Saudi state television, citing a royal court statement. The news has sent Saudi shares sliding, because now 89-year-old King Abdullah must nominate a new heir for the second time in nine months. And the last thing the middle-east region needs, not to mention the world's biggest oil producer, needs is more geopolitical uncertainty.
CNBC Asks, "So Why Are Spanish Bond Yields Falling?" I Ask The Better Question, "Why Are Spanish Banks Considered Solvent?"Submitted by Reggie Middleton on 06/15/2012 12:05 -0400
Remember, both as my research and the past 5 yrs have made clear, counterparty induced banks runs are the most damaging and Spains banks are hit from both RE and Sovereign debt crises. Who wouldn't run from this?