Update: Comments from Spain's Salgado taken out of context according to a Spanish official. Appears a caja or two will be sacrificially thrown to the lions after all. The Farce must go on!

• All Spanish banks pass stress tests
• All French banks pass stress tests
• Pretty much all Greek banks pass stress test

HA HA HA

The farce will continue until bullshit flows freely

Interest in the ECB's weekly 3-'On (Monetization Sterilization Operation) assault on free markets, also known as the Fixed Term Deposit Liquidity Absorption Tender was high, and came at precisely the same level as last week's. €97.2 billion worth of bids were chasing after €60 billion of ECB-regurgitated sovereign bonds, resulting in a 1.6 Bid To Cover, exactly the same as last week, when €98.3 billion of bids were after the same amount of ECB-sterilized worthless Spanish bonds. Of course, in other countries the Ponzi occurs by the ECB accepting collateral from banks which purchase their own sovereign debt. As Reuters reported earlier, 90% of the most recent 26 Week Greek Bill operation was purchased by Greek banks which subsequently received 100 cents on the dollar for each bond from the ECB- if there is a more accurate definition of a pyramid scheme we have yet to hear it. The marginal rate on the Tender came at 0.64% with a 1.00% max rate. The weighted average allotted rate was 0.56%. 88 banks participated in the auction, a slight increased from last week's 85. Elsewhere, demonstrating that real liquidity in Europe is bad and getting worse, 3M EUR Libor rates rose yet again, now well over 0.8% at 0.81125%, the highest since August 26, 2009. The ECB's deposit facility saw a plunge in usage, dropping to just €52.5 billion yesterday, as banks now have to look under the cushions for any and all free euros to allocate. Good luck European Small and Medium Businesses in trying to get a loan.

Yesterday’s activity was correctly predicted by the option market. Puts finished the day Friday quite bid on the short end, and that spilled over into Monday. Most put buying these days on Comex is a proxy for GLD put buying interest as the ETF has bigger volumes than the future market. This alone should be cause for systemic risk alarm bells. Another example of a derivative trading more than the underlying it tracks. But I digress.

No surprises in the housing starts and permits data, which continued the disappointing recent macroeconomic trend. June starts came in at 549K on expectations of 575K, even as May data was revised down from 593K to 578K. Of course, with roughly 12 million vacant units still to clear out, 8 of which in shadow inventory, it is a little odd this number has not been at zero for about the second year running. Futures, somehow, ramp on this disappointing number.

Things are so back to normal in Europe that even a country living exclusively on ECB life-support can barely pull off a 3 month Bill auction. The interest on the just auctioned off €1.95 in Bills which had to be completed as else Greece will be officially bankrupt (as opposed to just make believe) with existing bills rolling and no more cash in the Treasury, was a whopping 4.05%, compared to 3.65% in the most recent April 20 auction. Yet despite this ridiculous yielld, the Bid To Cover still declined from 4.61 to 3.85. Also compare this to the 4.65% yield on the 26-Week Bills issued last week, and you get a postcard picture of financial health emanating from the beaches of the Aegean. One thing is certain: Euribor and short-term funding are completely unavailable to any Greek institution.

The day every sane investor has been waiting for is here - today marks the end of the Radioschack LBO rumors. After 3 years, 4 months, 50 days. 8 hours and 44 seconds (give or take) of hourly rumormongering that the increasingly irrelevant electronics retailer was supposed to be bought "any given day now" at a 10x+ EBITDA multiple by each and every PE firm in the universe, and with allegedly intelligent investors falling for it each and every time, it appears the end is here. Incidentally, according to preliminary calculations, a dedicated investor that would have done nothing but short RSH on every rumor spike would have returned about an 80% CAGR over the past 3 years. Couple this with selling RSH CDS and the ROI would have been the highest recorded in human history. From Reuters: "Blackstone Group and TPG Capital are unlikely to continue to pursue a possible bid for RadioShack Corp (RSH.N), two sources familiar with the situation said on Monday. Bain Capital had been interested earlier but is no longer in the auction, sources previously told Reuters." And with this, an entire section of rumor disseminators at the NY Post will suddenly find themselves praying Congress passes the unemployment extension bill later today.

In his traditionally curt and to the point way, Hugh Hendry proclaims his "love" for the president, in this rare profile piece on the Scottish fund manager by the NYT. While none of his opinions will come as a surprise to Zero Hedge regulars ("The euro? It’s finished, Mr. Hendry proclaims.  China? Headed for a fall."), we do recommend the article to those still unfamiliar with one of the truly iconoclastic fund manager still left in the open. While Hendry does not run a fund nearly as large as some behemoths out there (his Ecletica is less than $1 billion, John Paulson is $30), it does afford him a nimbleness that JP (whose recent rumored liquidations in the gold market are destined to create feedback loops that further accelerate liquidations) or, much more blatantly, Pimco (with its $1 trillion + in Treasuries, Corporates, Sovereigns and Mortgages) which is the market in all its verticals, can only dream about. It also affords him the opportunity to say what is on his mind, and on those of many others, who however dread the political consequences for being a little too honest. It is this forthrightness and honesty that has reserved Hendry a sterling place within the Zero Hedge community, his candor regularly scoring posts receiving well over 20k reads (and at 60k hits, his "I recommend you panic" is among the Top 20 most popular Zero Hedge posts of all time.