Bond dumping and Berlusconi

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BNP Paribas SA and Commerzbank AG (CBK) are unloading sovereign bonds at a loss, leading European lenders in a government-debt flight that threatens to exacerbate the region’s crisis.

BNP Paribas, France’s biggest bank, booked a loss of 812 million euros ($1 billion) in the past four months from reducing its holdings of European sovereign debt, while Commerzbank took losses as it cut its Greek, Irish, Italian, Portuguese and Spanish bonds by 22 percent to 13 billion euros this year.

Banks are selling debt of southern European nations as investors punish companies with large holdings and regulators demand higher reserves to shoulder possible losses. The European Banking Authority is requiring lenders to boost capital by 106 billion euros after marking their government debt to market values. The trend may undermine European leaders’ efforts to lower borrowing costs for countries such as Greece and Italy, while generating larger write downs and capital shortfalls.

European finance ministers pledged to roll out a bulked-up rescue fund next month, leaving Greece and Italy on the front lines until then in the fight against the debt crisis.

Greece was ordered to provide written acceptance of bailout terms in order to win an 8 billion-euro ($11 billion) loan installment by the end of November, while Italy was pressed to turn budget-cut promises into reality.

Greece’s reforms “have to be carried out immediately, we cannot wait until there’s a new government, because that could be in March,” Austrian Finance Minister Maria Fekter told reporters today before the second day of a European finance meeting in Brussels. “We need confirmation in writing from all parties.”



European stocks rose, with the Stoxx Europe 600 Index rebounding from a two-day decline, as investors awaited a vote on Italy’s budget that will show whether Prime Minister Silvio Berlusconi still has a majority. U.S. index futures advanced, while Asian shares fell.

Vodafone Group Plc (VOD) gained 2.3 percent after increasing its full-year earnings forecast as profit beat analysts’ estimates. Repsol YPF SA (REP) climbed 5.4 percent after raising its prediction for recoverable reserves in Argentina. Banks rallied as Societe Generale SA, France’s second-biggest bank, and Lloyds Banking Group Plc (LLOY), the largest mortgage lender in the U.K., both gained more than 7 percent.

The Stoxx 600 rose 1.4 percent to 241.65 at 11:00 a.m. in London. The benchmark measure has rallied 12 percent since this year’s low on Sept. 22 as investors speculated that the euro area would protect the economies of Italy and Spain from the sovereign-debt crisis.

EBay Inc. (EBAY) options traders are paying the most ever to speculate on declines as U.S. consumer confidence at a two-year low threatens holiday sales.

Contracts that pay should the largest online marketplace fall were priced 9.49 points higher than comparable calls on Nov. 4, a record and double the 4.57 median since 2005, implied volatility data compiled by Bloomberg show. The relationship known as skew, based on three-month options 10 percent above and below the stock price, has risen from 4.51 in July.

Consumers grew less confident in October, driving a Conference Board sentiment index to the lowest level since the recession in 2009. Chip Hendon, who helps oversee $14 billion at Huntington Asset Advisors Inc., said options show investors are concerned that San Jose, California-based EBay’s shares will drop with the U.S. jobless rate stuck at or above 9 percent. EBay generates about 46 percent of its business in America.


The euro fluctuated between gains and losses against the dollar before Italian Prime Minister Silvio Berlusconi faces a budget vote and amid speculation that Greece is close to forming a national government.

The yen advanced as Asian stocks dropped for a second day, increasing demand for haven assets. The franc rose against the euro as Swiss National Bank Vice President Thomas Jordan said the SNB is not weakening the nation’s currency to gain export advantage.Australia’s dollar fell for a third day against the yen after data showed the nation’s trade surplus narrowed more than economists forecast.

“It’s going to be a choppy session for the euro as people in the market monitor risk events in Europe,” said Henrik Gullberg, a currency strategist at Deutsche Bank AG in London. “The euro is going to be headline-sensitive. Having said that, it has been quite resilient despite what’s going on. That may be partly because of overextended positioning in the market.”

The pound approached a one-month high against the euro before Italian Prime Minister Silvio Berlusconi faces a parliamentary vote that will test his leadership, boosting the appeal of British assets as a haven.

Sterling rose for a second day versus the dollar. Today’s vote will show whether the Italian leader has enough support to stay in power and implement austerity measures to trim the region’s second-biggest debt load. Britain’s currency stayed higher as a report showed U.K. manufacturing expanded in September more than economists predicted

“The pound is benefiting from being a safe haven from the fact that it isn’t part of the euro monetary union,” said Shant Movsesian, a strategist in London at 4Cast Ltd. in London. “The economic downturn is very much expected and has been largely priced in, so when you get an upturn in data it is seen as welcome relief.”



The U.S. is reaping its smallest corn harvest in three years after a drought damaged what was a record crop as recently as July, driving annual prices to an all-time high and curbing an expansion in global food supplies.

The government will forecast production of 314.7 million metric tons tomorrow, 27.4 million tons less than four months ago, the average estimate of 30 analysts surveyed by Bloomberg showed. The cut is equal to output in Argentina, the second- biggest exporter. The U.S. Department of Agriculture already expected a third annual drop in global corn stockpiles and the first in soybean inventories in three years, offset by an expansion in wheat reserves to the largest in a decade.

Corn, used mostly to make livestock feed and ethanol, is the only one of eight members of the Standard & Poor’s GSCI Agriculture Index to gain this year. At a time when global food prices tracked by the United Nations fell 9.1 percent from a record in February, U.S. consumers are paying the most ever for pork chops, ground beef, flour and cheese. World food costs are 68 percent higher than five years ago and combined corn, wheat and soybean stockpiles are dropping to a three-year low.

Oil rose to the highest price in more than three months in New York on signs of shrinking stockpiles in the U.S. and amid speculation European leaders will make progress in containing the region’s debt crisis.

Futures advanced for a fifth day, gaining as much as 1.1 percent. Crude supplies at Cushing, Oklahoma, fell 4.4 percent in the first three days of the month, data from DigitalGlobe Inc. showed. Prices also gained amid speculation Iran’s nuclear plans may threaten Middle East stability. Greek Prime Minister George Papandreou will resume talks today on forming a government, while Italy’s Silvio Berlusconi faces a vote that will determine if he has the support to stay in power.

“Italy is too big to save, and too big to fail, so whatever happens there will have an impact on sentiment across the board,” said Ole Hansen, senior manager of trading advisory at Saxo Bank A/S in Copenhagen. “Until we have additional news out of Italy on the economic side, it seems technically driven, and also with worries on the supply side.”

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mbtshoe's picture

FDIC loan loss sharing details are a total taxpayer ripoff to big money types and billionaires like Soros, Dell, GS execs.   Look up OneWest Bank started by those guys.   FDIC sold them a portfolio at up to 50% discount and the FDIC backs up to 90% of losses, not based on what OneWest paid, but the ORIGINAL amount of loans.  OneWest makes more money not working out any loans and letting them foreclose and cashing in from the FDIC.









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Hedge Fund of One's picture

I have been wondering who is buying those bonds? I thought ECB had stepped aside, but maybe not.


Buck Johnson's picture

They can't even sell bonds for the EFSF, much less bonds from sovereign countries.  They are playing musical chairs and they are about to find out what happens when there is no chair.

gangland's picture

get your shit stright idiot yesterday you were shilling europe on the 'mend'

Zero Govt's picture

he's just hedging ...

...which now CDS's are effectively wiped-out in Europe is more than Goldman Sucks is !!

Georgesblog's picture

We should at least study the lessons of history. If we recognize development, before events happen, we can prepare safeguards and make decisions

Zero Govt's picture

Bombs Away 

prepared for that? ...can you catch a falling sovereign debt market???

falak pema's picture

when the saints go marching in...they lose their halos and their triple As. Hell's kitchen is not for saints, its for sinners. The day you lose your triple A you go from saint to sinner. 

Berlu is already in purgatory on his way to wherever you go once your bunga costs more than it brings home.

upWising's picture

Old Fr. O'Malley, Pedophile Old Bastard that he was, always told us at ST Bridgit (of Sweden!!) School about LIMBO, where unbaptized babies go, or at least USED to go.  I think the Holy Mother Church, in her Infinite Wisdom, has decided that LIMBO either never existed, is full, or has been Rebranded or Redeveloped (like a really bad Chicago Housing Project.)  Timeless Truths, and all that. [Kind of like all the people who are rotting in Hell for a bite of Beef jerky because they thought it was Thursday and it was really Friday.]  Anyway.....

Is it possible that LIMBO really DOES exist, and we could send all the SIV's, CDO's, EFSF, and other "Innovative Super-Leveraged Financial Products" to LIMBO so the Unbaptized Babies would have something to play with?  I think LIMBO was a kind of timeless place where clocks stood still.

Maybe if we all went down and lit one of those BIG $2.00 candles and said a bunch of Hail Mary's.....


Tramp Stamper's picture

So what is the outcome if everyone is selling sovereign bonds at a loss, nobody will show up at the future auctions because nobody will want that trash.  Who is going to be the future buyer ECB?  Forever?

Rogier's picture

The ECB is not allowed to buy bonds in the primary market, it can only operate in the secondary market. But your question is valid: who will buy the 30 billion in new bonds that Italy is planning to sell later this month? Tyler, care to comment?

NotApplicable's picture

So, in other words, a primary dealer gets to front-run them for easy money from the ECB's magic checkbook (and The Bernank's, of course).

falak pema's picture

quick send paul krugman to the moon! For help.

Georgesblog's picture

This illustrates the point that war is a commercial action. The target ion the Debt War is national gold reserves.  The weapon is paper.

falak pema's picture

wow marc Faber think they can kick the can for eleven more years. Now based on that vote O'bammy and Sarkozy. WHat a bore!

Zero Govt's picture

11 years of can kicking... No/Zero Chance

by end of 2014 all US and Eurozone Govt debt will be toast