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Another Late Session Ramp Up - Here Is The Latest Deus Ex

Tyler Durden's picture


Following two poor bond auctions in the overnight session from Spain and France, things once again looked set to fall apart in both the stock futures and the FX (EURUSD) markets until the latest deus ex appeared after the latest report by international creditors on Greece’s finances  recommended paying the next installment of aid to Greece as soon as possible. Naturally: after all such a payment is merely passthru funding which Greece hardly sees one sent of, and the bulk of the capital is immediately recycled to creditors in the form of interest expense and debt maturities. Bloomberg quotes “The Commission services recommend the sixth disbursement to Greece to take place as soon as possible: as soon as the agreed prior actions on fiscal consolidation, privatisation and labour market reform, which were announced by the government, have been legislated,” the report by the so-called troika of officials from the European Central Bank, EU Commission and IMF said. Of course, were the Troika to allow full disbursement without any "stern" warnings over the deterioration in the Greek economy, in which nobody works any more, the Finance Ministry is occupied and a general strike is the "new normal", it would have been beyond farcical. Which is why the Troika noted that the Greek debt ratio, which exceeded 140% of GDP at the end of 2010, will remain “at very high levels for many years,” according to a draft report by the Troika. “If fiscal consolidation and privatization targets are respected, and growth responds to structural reforms, the debt ratio may start declining from 2013 onwards...When compared with the outlook of a few months ago, the debt sustainability has effectively deteriorated’." And it will continue deteriorating because Greece now knows too well it can demand anything and everything from Europe and it will get it, since nobody at the Troika can ever refuse to fund the insolvent country's monthly pre-alimony payment.

In the meantime here is some more color on the Spanish and French bond auctions, which both "succeded" yet at the expense of higher interest rates:

Spain sold 3.9 billion euros ($5.4 billion) of bonds but paid high borrowing costs on Thursday after a run of credit-rating downgrades, keeping pressure on euro zone leaders to resolve their differences over how to contain the bloc's debt crisis.


The Treasury sold three bonds to raise a bit more than the midpoint of its 3.25-4.25 billion euro target, two days after Moody's followed the two other three major ratings agencies in downgrading Spain's debt. The two-notch move was largely priced in by markets.


The Treasury sold 1.08 billion euros of the 2017 bond, 1.04 billion euros of the 2019 bond, and 1.78 billion euros of the 2021 bond.


Spain paid an average yield of 4.782 percent on its 2017 bond, last sold in May 2009. On the 2019 issue it was 5.110 percent compared with 4.969 percent when it was last sold on Sept. 15. On the benchmark ten-year bond it was 5.433 percent after 5.896 percent when it was last sold on July 21.


France also returned to markets on Thursday, selling 7.5 billion euros in fixed coupon bonds which were well received despite Moody's warning it could be hit with a negative outlook on its triple A rating. It is due to sell inflation-linked debt later.

And while the MSM would like readers to believe the French auction was a success, the market begs to differ:

Spread of 10-yr French yield over bunds hit another euro-era record after auctions this morning saw a sharp rise in yields on sovereign ratings concerns after Moody’s warnings earlier this week. 10-yr spread over bunds jumps to 118bps, highest since 1992, from 117bps earlier this morning. 10-yr yield +2bps to 3.22% vs 3.20% earlier this morning; hit 3.28% yesterday, highest since Aug. 8. 2-yr yield +3bps to 1.38% from 1.29% earlier today.

To be sure spreads did moderate modestly, after the ECB once again came out and rescued market sentiment by buying more Italian bonds in the open market.

Stick Save #n+1.


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Thu, 10/20/2011 - 07:13 | 1791838 gojam
gojam's picture

We have seen the full Greek pantheon of Deus Ex Machina.

Thank Gods for polytheism!

Thu, 10/20/2011 - 07:16 | 1791841 HD
HD's picture

When will this finally implode? How long can they drag this out - and really whats the point in doing so? Everyone knows the end game - except CNBC...

Thu, 10/20/2011 - 07:15 | 1791842 Fips_OnTheSpot
Fips_OnTheSpot's picture

Sixth payment will be delayed, since IMF want to wait for "results" from EU-Summit this weekend.



Results - hahahah!

Thu, 10/20/2011 - 07:16 | 1791845 Ham of Love
Ham of Love's picture

And soon the Spartan warriors start crossing the border

Thu, 10/20/2011 - 07:16 | 1791846 Ol Man
Ol Man's picture

"...after all such a payment is merely passthru funding which Greece hardly sees one sent of..."


Maybe  "cent"....



Thu, 10/20/2011 - 07:17 | 1791848 Boilermaker
Boilermaker's picture

I love relentless fraud with my morning coffee.


Thu, 10/20/2011 - 07:23 | 1791863 Lady Heather...UNCLE
Lady Heather...UNCLE's picture

...a false flag op is desperately needed...where's a patsy building 7 when you need it?

Thu, 10/20/2011 - 07:24 | 1791869 Lady Heather...UNCLE
Lady Heather...UNCLE's picture

...WE ARE SPARTANS!! (spartan, morelike)

Thu, 10/20/2011 - 07:28 | 1791877 broke433
broke433's picture

Who cares Gaddafhi is captured...

Thu, 10/20/2011 - 07:30 | 1791881 Scalaris
Scalaris's picture


Debt collapse > Social unrest > Politicians arguing 

If AD/DC's - Skies On Fire is playing in the background while rolling footage of the above images once would have quite the documentary.

Thu, 10/20/2011 - 07:35 | 1791903 reload
reload's picture

Lots more earnings today - the fund management community still think corporate earnings are solid, even though some of the smart money is not bullish medium term, they see the bigger risk as not being `in` the market in case earnings are good (i.e they are already discounted as good) and in case a miracle gets pulled out of the hat by the troika.

Dr Copper aint buying it though - further weakness in the European session. FTSE has been thin and jumpy - just following the EURO/$.

Its hard work being short!

The `banks to recapitalise themselves without EFSF` story was a help - but shortlived. I think that the word on that was already out. I know Lloyds and RBS have been making enquiries on the street.   

Thu, 10/20/2011 - 07:38 | 1791914 RoadKill
RoadKill's picture

I'm am geting this "." close to throwing in the towel on this whole thing.

Im not a perma bear.  I wasn't in the market at 1,350 because I knew the US debt ceiling debate was going to be a disater.  Since, Ive been making $$ (alot actually) buying at 1,100 and selling at 1,200.  The reason for that range is that while I didn't see a double dip recession on the horizion (eg SPX EPS of $75 x 12) I also didn't see GDP growth being more then 1%-2%, so I thought $95 x 12-13 was about fair.

But that was precedented on Greece being allowed to fail, hiarcut by 50% and France and Germany recap their banks!  Looks like thats not going to happen.  So now - Europe in Recession, China slowing, US about to have another disaster via super committee.  I'm about 30% net short via SMDD (@ 22) and FAZ (@ 50) after being 100% long at SPX 1090.  Maybe time to get more short if we are going up today on this BS.

Thu, 10/20/2011 - 07:43 | 1791931 broke433
broke433's picture

Everybody and their mamas are short...

Thu, 10/20/2011 - 07:46 | 1791948 BetTheHouse
BetTheHouse's picture

Are you calling my mama short? 

Thu, 10/20/2011 - 09:16 | 1792380 Bicycle Repairman
Bicycle Repairman's picture

Yo Mama's so short, you can see her feet on her driver's license.

Thu, 10/20/2011 - 07:45 | 1791942 firstdivision
firstdivision's picture

The news out of Europe feels like an alternating harmonic series.  Eventually it'll converge some day.

Thu, 10/20/2011 - 07:45 | 1791944 broke433
broke433's picture

I would rather short gold than the ES, way more downside

Thu, 10/20/2011 - 07:49 | 1791959 jbc77
jbc77's picture

The farse continues, no surprise there. Greece shut down, in flames, how does "the market" ramp on shit like this??? Another shitty claims number I suspect today, maybe that will gas the markets even higher. How anyone can trade these shitty markets is beyond me, got a better chance at the casino at least there you know where you stand.

Thu, 10/20/2011 - 07:56 | 1791984 oogs66
oogs66's picture

so the ecb buys old spanish bonds so those investors can reload at the auction and all is good - no direct ecb participation in an auction - fraud!

Thu, 10/20/2011 - 08:00 | 1792001 Tense INDIAN
Tense INDIAN's picture

does it really have to be a ramp up everytime could be normal market behaviour ....up and down in waves

Thu, 10/20/2011 - 08:31 | 1792163 dvsteenk
dvsteenk's picture

they keep it afloat at least until derivatives expire maximum in the money

u are right about the ramping, the shape of the up and down movements is not wavy at all, sawtooths and sticksaves is all u get in this fake market

Thu, 10/20/2011 - 08:03 | 1792019 dcb
dcb's picture

ok, when are you guys going to just chart the speed lines. also how many days do we finish at the bottom and have higher futures, rather often

Thu, 10/20/2011 - 09:05 | 1792314 Schmuck Raker
Schmuck Raker's picture

Tyler, this doesn't look right.

" 10-yr yield +2bps to 3.22% vs 3.20% earlier this morning; hit 3.28% yesterday, highest since Aug. 8. 2-yr yield +3bps to 1.38% from 1.29% earlier today. "

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