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Spanish Spreads Rally To One-Year Tights As EURUSD Hits 3-Month Low
At the lows, the USD had its best gain in 9 months today, but a small give back into the European close leaves EURUSD back below 1.30 having hit its lowest in three months. It seems the EUR-USD exchange rate has recoupled perfectly with the Fed/ECB balance sheet shifts. Bond spreads are tumbling amid this 'devaluation' as Spain's 10Y spread to Bunds has dropped to its lowest in a year (though Italy remains well above one-year lows). Spanish stocks also surged - up 5.5% this week! And Europe's VIX has plunged back to one-month lows. What's not to like? Oh apart from the macro fundamentals that are crashing everywhere in Europe.
Spain notably outperforming Italy here... the periphery is becoming fragmented
as EURUSD weakness is now a good thing apparently...
recoupled with Fed/ECB balance sheet...
as European Stocks just smashed higher this week...
as European stocks join the 'ignore macro reality' game...
Charts: Bloomberg
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Printing works
i wonder why nobody tought about printing before in the history of mankind...
Laws against counterfeiting?
Gutenberg started printing in 1436.
I thought 1444. That must have been QE2.
OT, but not much: just a while ago some commentators tried to explain to me that Beppe Grillo wants Italy out of the EUR
here, from the horse's mouth in a TIME interview:
Q: Do you think Italy should leave the euro?
A: I’ve never said I want to be in or out of the euro. I said I want correct information. I want a Plan B for survival for the next 10 years. And then, with a referendum we decide. The costs and benefits, let’s know what are they are. But first you need to inform. If you just hint that you want to leave the euro, you’re crazy. There’s no dialogue. Just hint, and you’re a demagogue, you’re crazy, you want to drag Italy to default, you’re irresponsible. Just because you say, let’s think about this, what would really happen?
source: http://world.time.com/2013/03/07/italys-beppe-grillo-meet-the-rogue-come...
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Further: Once Beppe Grillo was involved in a discussion where a gentlemen tried to explain him the German situation with their gold in NY, to which he answered: "That stuff is the ecologically worst thing ever and what sense makes to dig it out of one hole just to put it under a bank?" - straight out of one of his comic routines
Interestingly, one of the things Beppe really wants is the return of the minimum wage in Italy
I definitely asserted that Beppe wants their debts renegotiated, and threatening to leave the Euro is the only way to do it. Hell leaving the Euro is the only way to do it.
He wants correct information? From who, Goldman Sachs? Who is he going to rely on for "correct information"?
By the way if I were Beppe I would be playing nice nice too. Keep those yields from blowing up, possibly scaring the shit out of everyone and knocking him out before he had a chance to get in.
fonz, I was referring to a different discussion where the trend was in favour of considering the Italian elections as a referendum against the EUR. Here the link to the epic bloodbath I received for it (my record so far, -66. now I aim for -666)
Your point of view was way more balanced, and to which I fundamentally agree: threatening to leave the EUR is something Berlusconi is also doing
Who can tell the Italians that our dear Uncle Sam has an intelligent, greedy cancer called megabanks? that's the question
Plan A is the EUR. Plan B is to go all back to the original currencies, but this is scenario-dependent, and this is not the right time to be alone among the wolfes
One thing I know for sure is there is no Beppe over here. This is a big financial repression sandwich with a side of shut up.
- I just saw your exchange. Redpill was right as well as you were. People are just hanging on to tatters of hope that someone will magically upend this whole thing. Their sanity depends on believing that. By the way Mark Grant is a total hypocrite regarding Europe and teh US. The good news is he will be onto Jack Handy quotes as soon as he starts running out and then maybe he has a chance at being funny.
ah, well, Italians do have a different electoral system where small movements and parties can be elected if they get nationwide traction
but don't think they don't currently feel in a big financial repression sandwich - they just lack the side of shut up - after all it's anyway quite difficult to shut up Italians, eh?
meanwhile the Italian "elites" go on in preparation for further financial war without explaing to the broader public what is happening and why
Well I hope they get everything squared away before their 3 month vacation.
OT - Chinese gold imports for January up 56% from last year.
http://www.businessweek.com/news/2013-03-08/china-gold-imports-from-hong...
"all precipitated on expected recovery in the US"? Can't say I know but this reovery positively stinks over here...
SHORT Spain
Covered Bonds will collapse.
Whole Spanish Banks are in default , Sovereign Bonds will need debt haircuts, Real Estate Market is completly frozen with Valuations that are fraud.
Spain 10yrs has to hit again the 7% hurdle....and we wll be downgraded to junk
The system is a farce
Theres is no freaking future in Spain. All people is lying, corruption. False Bookcooking-crooked.
SHORT EQUITIES,
SELL BONDS
Long CDS
Child homeless in NY 1%.
Child homeless in Madrid 0,00000000%
Whats wrong with you USA?
Cut that socialist crap.
It's not the "USA" that should take care of deadbeat parents' children.
More rate compression, just as Jim Grant described.
Get 'em while their hot.
QE Unendliche (infinite,, never ending,,, to the Moon, Alice)
Spain has extremely low borrowing costs despite having 25% unemployment because Draghi has guaranteed that he will print euro out of his ass and keep spanish bonds bid if necessary...depsite knowing Germany will never allow him to do that.....and the market will never call his bluff...and so spanish equities rally... Do I have this right?
Sadly, yes.
It all about who holds those spanish bonds and used them as collateral for derivatives via collateral transformation.
1) Holder of bonds
2) Derivative counterparty
3) Collateral transformation counterparty (pension funds)
ekm what is the trigger that sends spanish yields soaring?
My best guess would be MFG style.
Somebody big would have accumulated (on purpose) an insane amount of spanish bonds (like Corzine).
JPM or somebody else would call collateral, hence the big banks collapses. Nobody gets prosecuted.
I truly struggle with that. As long as we are throwing darts though I am going with UBS. I knew a guy who worked there and he was a dick.
I just see $85 crude and a 1.9% ten year both being moderately rangebound for as far as the eye can see.
Economy is literally DEAD BY ENERGY STARVATION.
Two options:
1) release the crude into the consumption market thus reviving the dead with oil at $40 for 6 months to 1 year
2) Starve the economy in order to save the crude oil storage owners (primary dealers and big players), thus triggering food riots or 100% part time employment as factory labourer at subsistence wages in order to replace the non human energy in storage with human energy.
Pick one. No other option. I pick number 1, since number 2 would lead to food riots.
is it me or does it look like they are going with door number 2?
Stupidity is the most abundant thing in the unverse.
Anything is possible
Oil seems reasonably priced and there are no shortages.
People waste way too much energy.
We have more oil than we need - we just need higher prices to realize that...
My WAG (wild assed guess) would be Citi. Everybody there has two bosses. How swell would that be?
http://www.youtube.com/watch?v=2SoWNMNKNeM
It's about to close at (or very close to 1575) again today
Still 20% Expensive the EURO.....
1.30 x 0,8 = 1.04 EURUSD FAIR VALUE
Where's that 0.8 factor coming from? The BigMac Index?
Zee stabilitee!
Not-for-profit buyer?
On-topic - I thought that the falling euro was supposed to increase the spreads between the periphery and core?
And yet the opposite is happening (except for Italy thanks to the election suprise). WTF?
That $4.5b that the FED is pumping daily has to go somewhere. Club Med debt is a good a place as anywhere:)