CNBC Asks, "So Why Are Spanish Bond Yields Falling?" I Ask The Better Question, "Why Are Spanish Banks Considered Solvent?"

Reggie Middleton's picture

CNBC asks So Why Are Spanish Bond Yields Falling? Well, that's a good question. Short answer: Well rates spiked dramatically, and we are seeing some retracement from the psychological balm of even more liquidity thrown from the global central planning cartel, otherwise known as the central banks. Of course, this begs the question, "Should the rates go down since the 'Global Central Planning Cartel' has failed for 5 years and running to put this monster to bed with liquidity injections?" Alas, I'm already ahead of myself. Let's peruse said CNBC/Reuters article, shall we?

Spanish and Italian bond yields fell on Friday as sentiment toward riskier asset improved thanks to plans for coordinated central bank liquidity injections to help stabilize markets if Sunday's Greek elections cause turmoil.

The prospect of easy access to central bank cash helped settle nerves ahead of Sunday's Greek vote which could put Athens on a path to exit the euro zone if parties opposed to the conditions of Greece's international bailout come to power.

"It's having a good impact... on the bond side we see Spanish yields turning lower. It tells us that central banks at least won't let markets collapse on Monday," said Emile Cardon, market economist at Rabobank in Utrecht.

After reaching a euro-era high above 7 percent on Thursday, Spain's 10-year bond yield eased 12 basis points from its closing level to 6.84 percent, while Italian yields fell 10 bps to 6.06 percent.

What???!!! Isn't this still quite close to a record? Sovereign bonds spike to record yields, after being forced upon private banks, causing insolvency, then said banks request bailouts from said sovereigns who do bail them out, thus bankrupting the country and forcing said bailed out banks to lend the bankrupt countries money again. Wash, Rinse, Repeat! Remember iDead Bank Deja Vu? How The Sovereigns Killed Their Own Banks & Why Nobody Realizes They're Dead… I have explained this nonsensical methodology in detail. I also showed how well it worked out for:

  1. Greece How Greece Killed Its Own Banks!
  2. the ECB .
  3. Italy Bank Run! Italiano Style?
  4. and now for Spain, as I will demonstrate a little further on in this post.
Back to the MSM...

Bund futures were flat at 141.83, recovering after a fall in after-hours trading on Thursday when Reuters reported that major central banks were ready to pump in liquidity, if needed, to prevent a credit squeeze.

Of course, as more and more investors ever so slowly start to realize that The Biggest Threat To The 2012 Economy Is??? Not What Wall Street Is Telling You.

Some of the relief in Italian and Spanish debt was due to speculative traders buying back bonds to close out short positions that profit when prices fall, traders said.

"People had probably gone quite short (on Italy) after the moves this week on Spain, so I'd expect, with the weekend coming up, people don't want to be short risk and are squaring up," the trader said.

In the medium term, Spanish debt was expected to stay under pressure despite the liquidity contingency plans, analysts said.

The agreement of a 100 billion euro ($125 billion) rescue for Spain's banks has sparked concerns about whether existing bondholders would be pushed further down the queue for repayment, denting appetite for new debt and driving borrowing costs toward unsustainable levels.

"Spain is still in deep trouble, let's not forget that. It has fundamental problems so liquidity to help hold things together doesn't really solve that," a second trader said.

On Thursday, 10-year Spanish bond yields hit 7 percent for the first time since the launch of the euro. The breach of this level raised expectations that the country would be cut off from funding markets and forced to seek a bailout for public finances on top of the agreed banking rescue.

So, as clearly articulated in Dead Bank Deja Vu? the sovereign debt shell game cum financing Ponzi of creating artificial demand through private banks simply assist in destroying both banks and sovereigns when initially you just had to worry about the banks. But in the case of Spain, there's a lot more to worry about - A lot more. Our current subsccriber update (click here to subscribe): Spanish Target Bank Update 6-2012 outlines the problems of a Spanish bank we have covered that is poised to suffer from a gargantuan issue that it simply cannot wiggle away from any longer. As a matter of fact, this issue, when coupled with its state imposed sovereign debt problem means "here comes the next big bailout!". As excerpted from the subscriber report....


Asset / loan Portfolio deterioration off weakened macroeconomic environment

The Subject Bank, like other major Spanish banks, is being forced to buy sovereign debts as the country finds fewer international buyers for its bonds. The Bank therefore continues to struggle from an asset quality perspective, weighed down by its sovereign & toxic property loans and assets. This has been a major cause for the deterioration of Subject Bank's portfolio over the past couple of years.

The Bank derives ~70% and over 20% of its total gross revenues from net interest income and fees & commission, respectively. The quality of its asset portfolio is therefore extremely important in determining the health of the Bank.

The Bank’s value of financial assets in Spain as of Dec 31, 2011 is over quarter trillion EURO, comprising nearly 50% of the total financial assets in its balance sheet or more than 600% of its total equity (think the negative effects of leverage and gearing as you witness asset value depreciation). In addition, of the bank’s total loans and receivables, over 50% are in Spain. 

With that being said, a picture (or a chart) can be worth a thousand words (or even more Euros considering the rate of depreciation that I see ahead)! When viewing the chart below, keep in mind that the asset values used to calculate this chart are most assuredly overstated, and even then the numbers really look pretty bad. Simply imagine what happens when truth (margin/collateral call, haircut, resumptions, etc.) start calling...

Spains_Ugly_Real_Estate_Crash_Will_Wreck_Banks_and_Force_One_of_Europes_Biggest_Banking_BailoutsSpain's Ugly Real Estate Crash Will Wreck Banks and Force One of Europe's Biggest Banking Bailouts. Remember a run on one big bank causes counterparties to panic. Counterparty induced bank runs do the most damage.

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silverdragon's picture

Scare the sh*t out of the masses so they agree to what they believe will save them, "a United Europe"

Militarily, Politically and most importantly Monetarily.

Yen Cross's picture

 Reggie/ Oh Reggie?


                        A Poet that listens to " CNBS" ?  I'm not going ( Marc) Fabre' on ya!

                                                                                                    Come on Reggie? You have some balls!

Setarcos's picture

On a lighter/darker note ... Hitchhikers Guide to the Galaxy!?  first episode in BBC TV series.

Relate this to banksters (aliens) destruction of peoples' housing.

I do not think that Douglas Adams had any idea that he was creating allegories of future relevance, but nay mind.

Later, in the BBC series (not the later crass movie), the rejects from the destroyed previous planet - I assume that you know the general story from even the Hollywood movie, or better the book - arrived on this planet Earth and immediately set up a commitee to decide how to organize things.

Of course nothing got accomplished and I am SO hind-sight reminded of the commitees in Brussels, which accomplish nothing.

At the risk of offending "true patriots" in the US, I venture to say that the commitee which wrote the Constitution also achieved nothing, on a long enough time frame, to coerce a "United States of America" that falls VERY far short of uniting all of the continent of America, from Argentinia to Canada.

The Continent of America is the sub-continent of Europe writ large, though both with commitees/think tanks trying to figure out how to organize everything and everyone; now even globally.

"Hichhikers Guide to the Galaxy" has come to take on far more depth of unintended insight, by Douglas Adams, than it previously did ... not least to do with the housing debacle.

Adams imagined some intergalactic force destroying everything, but all it has really taken is TBTF banks, corrupt politicians and commitees like the PNAC, AIPAC and the WTO (etc.) to fuck everything up.

If you have never seen the BBC series, nor read the book, then you will probably not know what I am going on about.

The only link I can find is:

Josh Randall's picture

In the Immortal words of Bo Diddley: You're a "KILLER DILLER" Reg'

jomama's picture

i'd give this article 6 stars if i could.

celticgold's picture

most assuredly , bailout central has relocated , temporarily , to spain


Zero Govt's picture

"...the sovereign debt shell game cum financing Ponzi of creating artificial demand through private banks simply assist in destroying both banks and sovereigns..."

well said Reggie

Question. has Spain a hope of getting a bailout?

do you agree with Graham @ Pheonix the ESM is running-on-empty (promises) and there simply isn't any money there or can the ECB save the day and 'Print' with some sub-terranean back-door bailout

Buck Johnson's picture

I agree, I don't think there is any money in dthe ESM.  All that is there or was including in the EFSF was promises and/or Germany footing the bill.  If there was money in it or good amount of money, they could have did a stealth loan to Spains banks and such and nobody would have known.  The reason people know is because they are trying to cajole countries (Germany and possibly the US) into putting money into the system so they can bail Spain out this MONTH (if you don't think there is more debt and problems in Spain I have a bridge to sell you).


Zero Govt's picture

Buck, we've had our answer

...on Friday Draghi said the ECB will "provide" (print) whatever is needed to keep the diseased rotten dinosaurs of European banking propped up

and this week Mervyn King of the Bank of England volunteered £140bn to equally rotten, equally bankrupt dinoaur British banks

the tea-sipping clueless turkey, King, has been increasing his wages and lining his already over-generous pension scheme despite being the worst Governor of the BoE in its history (the oldest central - monopoly -bank in the world) 

King has failed miserably in his mandate as regulator of the British Banks to ensure a healthy banking system (it's a huge stitched-up monopolist cartel), failed to address the banks are over-leveraged and mulitple times the British economy (systemic risk with giant alarm bells on) and failed at providing proper solutions which he never saw coming

how clueless, slack and incompetent the British 'regulators' were was Royal Bank of Scotland ringing up King and the Treasury to say can you hurry up with releasing your bailout policy (and money) as our bank is 24 hours from zero cash (ie. a bank 3 times the size of Britains economy was less than 24 hours from collapse from the dozy turkeys regulating it and they hadn't a friggin clue... un-fucking-believable!!!)

and King doesn't know a path "back to normality" (is clueless), is still looking for one (is clueless), never saw the bust coming in 2008 (is clueless) and wishes the problems would go away. They won't go away if you keep propping up the problems and bailing the problems out will they Merv you totally inept dipshit

Like Draghi and Bernanke, King is a prime candiate for winning the village idiot competition held annually in Davos, Switzerland. In fact King has been joint winner of the idiot prize since 2008 as well as the 'Least Likely to Succeed Policy' Prize

(sorry, needed a rant there when i heard of King lining his pockets yesterday!)

falak pema's picture

he now needs the Nobel or the dead-duck called Lenin. Then he can truly go to Oligarchy heaven; with a kick up his backside. 

Zero Govt's picture

Davos needs a new Prize, bit of a mouthfull:

the 'I Can Improve on the Free Market Model by Mortgaging and Bankrupting the Nation 7 Times Over' Prize

prime candidates are the Head of the Bank of Japan, the head of the Bank of England, the head of the ECB and the head of The Fed ....all central bankers by some strange coincidence

knukles's picture


With respect to CNBS, don't even borther trying to explain it.
It'll be a waste of time.

SAT 800's picture

"Why are Spanish Banks considered solvent?" It would make people too upset if they told the truth.

RoadKill's picture

Spanish bond yeilds are fallimg because market is mistaking ECB intervention post Greekapocolypse as LTRO 3, 4 5....

Just like mkt is misinterpreting Fed intervention as QE 3, 4, 5.

Mkt is going to be horrified on Monday when Syrza wins, bit only by a slight amoint and cant form a government. This leads to a third election in July. Meanwhile athensand madrid continue to burn. And coordinated intervention is simply swap lines to prevent interbank lending freeze.

Thos womt be over till...

1 Germany caves
2 Germany quits
3 Italy asks for a bailout
4 France gets cit 2-3 notches by the big 3

Divine Wind's picture

Thos womt be over till...

1 Germany caves
2 Germany quits
3 Italy asks for a bailout
4 France gets cit 2-3 notches by the big 3


Actually, I think all four will happen and this will just be the start.




falak pema's picture

the most exciting thing happening in Eurozone is the football; and England and France bite their finger nails on that! 

SAT 800's picture

Meanwhile; there's going to be a lot of meanwhile. "Do Not Adjust Your Set"; reality will be back shortly, we are having technical difficulties.

Mountainview's picture

Why are Spanish banks solvent? For the same reason as US banks!

SAT 800's picture

Yes; exactly; because it's not expedient to look too closely into the Sausage Machine.

Grand Supercycle's picture

Rally warning continues...

SPX & EURUSD bullish daily charts dominate further.

As mentioned, shorts will be slaughtered next week.

NotApplicable's picture

Maybe Corzine found another big ole pile of OPM and went double or nothing?

TahoeBilly2012's picture

Get out the spear again!

El Oregonian's picture

Lawyers for Ron Paul have taken over Paul's campaign and will have him nominated as the Presidential candidate and have Mitt Romney stripped of his delegates! Great interview and a MUST LISTEN.  Finally, some really great news on dismantling this Tyranny! Long Live Liberty!!

q99x2's picture

Lawsuits take many years sometimes. I hope they get the crooks.