If You Thought 2012 Was Tough For European Bonds...

Tyler Durden's picture

2012 was a tough year for some European government bond markets (Spain +100bps). Even with the rallies of the last few months, we remain dramatically wider than at the beginning and primary issuance is becoming increasingly reliant upon domestic bank reacharounds and/or ECB handouts. UBS expects 2013 to be similar in terms of gross supply to 2012 (around EUR 772bn) and aggregate net supply to fall slightly to EUR 208bn. However, these modest improvements overall (driven by drops in France, Germany, and Holland gross issuance) hide the biggest concern. Spain's gross (and net) issuance is likely to rise to EUR 124bn in 2013 (up 20% over 2012!) and Italy's net supply will rise notably next year (even with significant redemptions). Portugal, also faces a very significant increase in net supply in 2013.

Aggregate Net and Gross Issuance expectations for 2013...


and Changes from 2012... with Portugal facing some stress too


and we bet you never knew Poland dwarfed Greece in the recipient-of-EU-Aid department in 2011! (via Bloomberg)...


It would appear average durations of government debt in Europe will be shrinking in 2013...

Source: UBS and Bloomberg

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LetThemEatRand's picture

"domestic bank reacharounds"

Isn't that what Strauss-Kahn attempted in his NY hotel room?

ACP's picture

Yup, and here comes the deflation...


Japan-style 220 sf apartments...

...for anyone in the Fed or government or any of those other pundits who don't think Bernanke is running us down the same path.

EuroInhabitant's picture

Pimco invests in Southern Europe again, now that the ECB guarantees its bonds. So Spain and Italy will easily succeed in their financing in 2013, just like this year.

ciaoant1's picture
A few thoughts on the matter of deficits: Do they matter or what?

[...] Everyone knows that almost all Western nations have been running trade deficits for decades know, and that it was once -famously- said that "deficits don't matter". This may sound strange, but I kind of agree: 

It's not the 'deficits/debts' themselves that matter, rather than the 'ability to repay these debts in the future through future productivity" that actually matters. For example, there are no people that would loan me 1.000.000$, because noone seriously believes that I will be able to produce enough wealth in the future to repay such a loan. But there are a lot of people that would gladly loan 1.000.000$ to APPLE, because they think (rightly or wrongly so) that APPLE will be able to produce enough wealth in the future to repay this loan (+ interest of course, why else would the bondholders loan the money?). 

The problem today is that most corporations (AND countries) have very little (or zero) CREDIBILITY (i.e noone believes that they will be able to repay their loans).

This is why deficits didn't used to matter, but now they do: People used to think that "countries are always able to repay their loans", so they are always credible, and thus "their deficits don't matter [because they will be able to repay their debts in the future through future productivity]". Now, their credibility is gone, so now "deficits matter"...




disabledvet's picture

"your fired. Thank you for playing."

Frastric's picture

All part of the debt monster, that's what happens when debt is money and dem greedy banks demand interest which can't possibly be paid back!

fonzannoon's picture

OT but did that kid Luke post that vid about Bernak grabbing his mike?

DowTheorist's picture

Go and get your gold!!!

THE DORK OF CORK's picture

Poland is the EU golden child............

It had a surplus of coal until recently..............the EUs great gift is the ability to turn fossil fuel into Grot.


It runs down capital in the most efficient manner possible but because it is a black market state it cannot nor will not spend money to increase its core capital base as this would damage profits.

Leverage  = efficiency


All of the energy savings made in Europe is for nothing as almost all of the surplus created feeds back into the fully private money system that is then wasted on their consumption.


You cannot get net capital growth in Europe and the Euro , it is simply impossible in such a extreme market state construct.

Only nation states with a strong executive or pre 1648 Kingdoms can spend money into existence to increase their core capital base.

disabledvet's picture

"the truth is strong with this one. I can't seem to get a lock on him...

adr's picture

On Thanksgiving all will thank The Bernanke for his benevolence to allow worthless paper to trade for record amounts. For allowing Facebook to climb 20% so Zuckerberg can keep his Chinese wife happy by giving her a few million dollars more. For helping mask accounting fraud so all can have their holiday bonuses to rebuild destroyed beachfront property.

And last but not least, thanks to Bernanke for keeping Obama in power so Obamaphones can be under every Christmas tree.

Dareconomics's picture

Those numbers are very optimistic. Spain will run a budget deficit approaching €100bn (8% of €1.18trn GDP) not the 5.3% and €64bn or so forecast. Furthermore, these numbers do not account for the cost of a Spanish bank bailout, which adds at least another €60bn to the total. Adding these figures together (€100bn deficit + €60bn redemptions + €60bn bank bailouts), we see that Spain will have to sell €220bn in bonds next year plus whatever the unfinanced deficit is in 2012.


disabledvet's picture

The Spanish authorities have been consistenly low balling their financial needs. This is NOT why we elect our reps in my view. That is why I say "the catastrophe of Sandy is 350 billion" and not 35 as claimed by some. In other words "your open" as it were (in poker parlance) "should be large." ALWAYS.

LeisureSmith's picture

Thanksgiving makes for slow goings on here on ZH... Have a good one y'all.

and we bet you never knew Poland dwarfed Greece in the recipient-of-EU-Aid department in 2011

For the record, you bet right.

xipt's picture

"Poland, the largest recipient of European net funds in 2011, also faces a very significant increase in net supply in 2013." - where is that info coming from ?

wuzetka's picture

2012 gross issuance is planned to end at 168,5 bln, next year it's planned at 145 bln. So with 109 bln maturing, that is 60 bln PLN in net in 2012. 99.6 matures in 2013, so that is 45 net. Looks like a fall of 15 bln pln or a 25% decrease in net supply, not  an increase.

wuzetka's picture

In 2013 Poland’s gross planned issuance is around 145 bln PLN. 99,6 bln PLN of bonds matures in 2013. So there is around 45 bln PLN of net issuance (ca. the same as UBS shows). Around 20% of needs are prefinanced currently so the market will need to absorb around 109 bln PLN. That means that investors will need to buy around 10 bln PLN or 2,5 bln EUR of new additional debt to what they already hold.

As for dwarfing Greece in EU Aid, first don’t confuse debt relief with EU structural funds that Poland is entiteld to based on our EU accession. Second the GDP of Greece is 2,62 times smaller than Polands and it’s population is 4 times smaller than Poland, so per unit of GDP or per capita Poland actually receives much less than Greece, even though nominally it’s a much richer country. So what’s your point?

news printer's picture

Chart 1 is for EMU-11 European Monetary Union

Poland is not in Euro Zone!!!!

So Chart 2 is the same It's not Poland It's PORTUGAL

Last Chart is OK