Is 6% The Point Of No Return?

Tyler Durden's picture

Via Peter Tchir of TF Market Advisors

With Italian 10 year bonds crossing the 6% yield threshold, it is worth seeing how other bonds behaved.

For Greece, the chart starts on Sept 4,2009, and it first crossed the 6% threshold in the week of January 15th, 2010.
For Ireland, the graph starts on May 7th 2010 (right before the original bailout) and it breaks 6% for the first time during the week of September 10th, 2010 (around the time of EFSF V1.0’s announcement).

For Portugal, the graph starts on May 14th 2010 (right before the original bailout) and it breaks 6% for the first time during the week of September 17th, 2010 (around the time of EFSF V1.0’s announcement).

For Italy the graph starts on June 17th 2011 (before the “big” July bailout) and it just crossed the 6% threshold.

Greece broke 6% and never looked back.  It had a few rallies, but never really got close to 6% again.

Portugal and Ireland had similar experience until quite recently.  Portugal continues to track the path first blazed by Greece.  Maybe Greece is unique, but from a time series study, Portugal seems right on track to follow it.  Ireland has materially turned the corner, though it hasn’t improved recently.  I don’t think it is a co-incidence, that Ireland had let some financial institutions experience Credit Events, and then it turned the corner.

It is too early to tell what path Italy will follow, but at least for the other countries, they traded similarly prior to the breach, and followed similar paths after the breach.  Italy is too big, that I don’t think it can turn like Ireland did.  If Italy moves much further, I think it will follow Portugal and Greece.  They don’t have months to fix this, they have weeks, and they have been squandering them.

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Ethics Gradient's picture

Possibly, but almost irrelevant to Italy. 6.67 is quite a lot over 6.

Ahmeexnal's picture

Euro implosion scheduled for 11/11/11 at 11:11 hrs (Vatican time).


Ethics Gradient's picture

I'll try and remember you said that and quote you on it.

I'll either berate you for your continuing nonsense or enquire as to your funguses of choice. Not long to find out.

aleph0's picture

11/11/11 11:11 

LOL .. Exactly when the German Fasching ( Carnival ) starts ... on the second !

Schmuck Raker's picture

I recommend Jiffy Pop. Pretty good popcorn.

And, best of all, every package includes it's own built-in Tin Foil Cap.

WestVillageIdiot's picture

It looks like Ireland is still at 7% or so.  That seems unsustainable with how much debt they have taken on to guarantee their banks.

Does anybody have a good update on Ireland?  Are they actually enacting true austerity measures, unlike Greece?  Will they be allowed to maintain that advantageous tax structure for foreign companies?  I can't remember the last time a good article was put out on Ireland.  Perhaps no news means good news. 

sqz's picture

The difference is that culturally the Irish have demonstrated they can take on very harsh austerity measures (more than 13% of GDP) for four years already and they recently announced even more. Yet, even with that they have managed to produce two quarters of more than 1.5% inflation adjusted growth this year. Contrast that to Greece with extreme civil unrest that could escalate even further, coupled with appalling public finances and other strong political risks.

The market reaction? In short, despite a level of public debt comparable to Portugal and the highest private hosuehold debt in the whole of the developed world (190% of GDP), Ireland's long end debt yield has plumeted well into single figures while Portugal's is above 12%. Ireland and, even the UK, are good indicators that market does respond to those who at least try to seriously put their hosue in order.

Ireland is a restructuring outperformer both within the EU and internationally IF the EZ developments do not escalate to break-up levels. However, of course they will suffer more than the most diverse economies if there is a strong global recession or depression due to their lack of consumer spending. But at least they have demonstrated a level of committment and it is to a not completely defensive economic trajectory. That way, they can benefit if the broader economic situation does start to look up or merely stagnates slowly.

orgonor's picture

it pays to get fucked in the ass

AldousHuxley's picture

That's what a job is.


These days, you get it from your slave owner and then some more from government leaders...mostly old fucks.


When boomers die, your path better life would be determined by (1) whether you leave ponzi America or (2) your parents were top 1% during past 20 years.


Kiss meritocracy good bye



Ethics Gradient's picture

And everyone in the UK is on the hook for £666 of new IMF contributions.

agent default's picture

Ah, so that's what the number of the beast is about.

GeneMarchbanks's picture

Don't look to Greece for comparison and take a look at the ones due in 2012.

Is Draghi's next step in any doubt?

Hard1's picture

The point of no return with their growth prospects and debt/GDP level was 5%, but what the heck, there is always the tooth ferry

WestVillageIdiot's picture

I am picturing a boat heading across the Hudson filled with teeth.  That would be pretty interesting.  I hope they know they don't use gold in those fillings any more. 

KickIce's picture

Sounds to me they need to start hanging around rugby fields.

Vergeltung's picture

the pace of things seems to be accelerating!

WestVillageIdiot's picture

And then it slows down and we wonder what is going on.  The markets rally and the CNBC crowd trumpets "all is fixed" in the world.  Robo does another update about the Gazillions being made in specialty retailers (until one of them falls off a cliff).  Then a few days later the abyss stares at us again. 

Oswald Spengler's picture

I thought Italians made you offers you can't refuse.

WestVillageIdiot's picture

And the Chinese make you offers you can't understand. 

Innocent Bystander's picture

With that Italy takes the lead

poor Greece hungry for attention is is left behind in the dust.. Trodden and forgotten


WestVillageIdiot's picture

"Mommy, mommy, look at me.  I'm over here.  Look at me.  Mommy, look at me, I'm Greece, you fuckin' bitch.  Look at me." 

Oh regional Indian's picture

Italy can go to 9%, it will be back-stopped. It's the mafia, the global enforcers of the Vatican bulls(hit).

Nothing will happen. It is Spain. Spain. Pain in Spain.



falak pema's picture

Ori, the rain in Spain falls mainly on the 33 rd parallel plain. Pity its in Africa...Why don't we move it a few degress north. Then it hits both Spain and Italy!

Oh regional Indian's picture

Falak, Check out the figure in my grand thesis.

The vertical passes through Barcelona. And Ireland and Toulouse.....


The horizontal is the 33rd and it's ON FIRE.


Hephasteus's picture

That's a pretty fascinating blog post you got there.

Another event for the thing is Sarah Palin bought a house on the 33rd paralell and it brought out some systemic corruption. The tyler aggregate busted that one out though.

Oh regional Indian's picture

Thanks Heph. And yes, we discussed Sarah in Arizona here, next to McCain some months ago, Scottsdale I think?

Her house was ON the 33rd or right thereabouts.



RobertMugabe's picture

You know that Dan Brown writes FICTION, right?

SheepDog-One's picture

Satanic hand gesture from BurlySconi in 3....2...

hedgeless_horseman's picture



Because a rising tide floats all boats, it would be nice to see this chart with real rates (adjusted for inflation).  Alas, we are unlikely to have real inflation data in our lifetimes, no offense to John Williams.  This is why the spread to Bunds is so much more informative.

Prestidigiflation, bitchezzz!!!

Pay no attention to the central banker behind the economic data!

vegas's picture

The politicos can't even schedule a press conference without messing it up. The same asshats that brought you Greece, now go for ACT II with Italy. Expecting a different result with incompetent Merkozy et al is a complete stretch.

If there ever was a back swan event, it would be they could fix Italy and make it productive. Not holding my breath on that one.

mn2's picture

Oh my G. the world is ending again, sell euro sell the market what are we to do!!!!!  give it a rest....euro at 1.45 by end of year and market above 1300.....just keep those negative articles coming boys hahah

TheLooza's picture

not all negative articles mean that one should double down a short position. everyone here knows that a negative article must be offset by the knowledge that governments and other powerful financial bodies have an insatiable desire not to have economic collapse, and that they will constantly intervene to attempt to avert the same.  The central thesis here is that sooner, rather than later, tools will be exhausted, core missteps will be made, and there will be a collapse.  Evidence that that is happening is overwhelming -- but it doesn't mean that on this or that day the market won't surge because of yet another can kickng event.

WestVillageIdiot's picture

You might be right mn2.  But if you are correct an even easier, less dangerous play, seems to be buying bullion.  AU has acted like kevlar for the bears the past 10 years. 

Oh regional Indian's picture

"Kevlar for the Bears", Auuuu...

Very Good WVI. It's a t-shirt at least, a call to arms maybe!


TheLooza's picture

This is going to be epic.  Berlusconi is Qadaffi with worse hair.  There is no backing down with him, because that would mean an instant perp-walk.  


Bicycle Repairman's picture

Berlusconi is going to get immunity.  This isn't about blood.  Not yet anyway.

HD's picture

Mama Mia that's one spicy meataball!

hambone's picture

Spain is worse off than Italy - give it a little time and Spain should retake the bond collapse lead from Italy and looks set for an exciting finish to the Euro!!!

Piranhanoia's picture

My silly answer to the question would be;   That someone else has purchased what they thought was a stake in your nation, and now expects to dictate policy until you throw them out.

Marco's picture

Ireland didn't turn anything around ... it had a fundamentally solid economy which required little change (ie. no trade deficit). The high interest rates were because the financial class was waiting to see how the population would react to being sold out by their government (no better modern example of odious debt than Ireland). They said thank you may I have another sir, so interest rates could go back down.

Greece and Portugal have fundamentally unsustainable economies requiring massive shifts in consumption, production, education, wellfare etc. Italy could probably turn it around, they still have a decent industrial base.

LawsofPhysics's picture

" they still have a decent industrial base."

okay, so let's extend your logic...  if everyone in the EU is going to produce something, then who is going to be the consumer?  Moreover, does it really matter if NO ONE wants to be the consumer OR all the customers are actually broke?

Same logic holds for the WORLD, no one wants to be the customer and everyone wants to be the producer, good luck with that.

Marco's picture

Everyone produces that which they have comparative advantage in and consumes as much as others are willing to offer in trade. Perhaps putting some export tariffs on local natural materials low on the value chain, handing out some subsidies to knowledge intensive industries etc. because of the future value of keeping production and R&D local ... value not reflected in the direct income the products can generate.

To do otherwise requires wealth redistribution, doable inside a country ... but generally not for long between countries (with the US being the exception, although that too will come to an end).

Bicycle Repairman's picture

When do countries realize they cannot service these high bond rates or tire of austerity and sell of chunks of their national sovereignty?  Or will that be done on the QT? 

AndrewJackson's picture

It would be interesting to see this same compairson except with bund spreads.

youngman's picture

I think the Bond vigilantes are back.....they have been quiet for the last few years...if I was teh USA...I would be worried......they are licking their chops on our bonds..

Peter K's picture

Nice picture. BTW, are you trying to reinforce stereotypes? :)