BTP Stick-Save Fail!

Tyler Durden's picture

All it took was 30 minutes of reality-soaked headlines from Cannes and Draghi's heroic efforts to hold 10Y BTPs below 450bps have failed. BTPs have reached almost 456bps over Bunds now - only 6bps tight of all-time intraday record wides.

And with a h/t to @AndrewYorks we note the interesting dislocation between ES and BTPs today:

UPDATE: 88 handle up for BTPs (6.37% yield and Bunds +457bps)


Charts: Bloomberg

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GeneMarchbanks's picture

Called it!



slaughterer's picture

We want 500bp before EOD.  Have Mario try another stick save to get it there.   

rosex229's picture

Correct me if I'm wrong, but the entire point of the summits, meetings, initiatives, announcements, stick saves, interventions, agreements, etc. over the last several weeks that caused stocks to soar was to prevent contagion to Italy.

Being that the single purpose of that this fretting and market rise was to protect Italy from needing a bailout (because they're impossible to bail out as the worlds 2nd largest bond market) shouldn't stocks crater?

I'm going all in TVIX, I'm hoping to win big, but there's always that possibility... in other words, risk ON on my risk OFF trade.

TrafficNotHere's picture

Could someone please explain what this means?

" hold 10Y BTPs below 450bps have failed. BTPs have reached almost 456bps over Bunds now - only 6bps tight of all-time intraday record wides."

I am assuming it is bad news (its on zero hedge after all :) but clueless as to what. Yes, I am still trying to learn and have accessed such quesitons before and people have been helpful in thier explainations.



rosex229's picture

If the spread holds above 450 bps, then Italian bonds are seen as being risky enough to warrant higher margin requirements leading to a positive fedback loop that would deteriorate the situation much further.

Eurodollar's picture

I guess one in laymans terms could say:

450bp+ off the bund mark means higher margin requirements for those holding italian debt. Especially if you have been caught with your fingers in the leverage cookie jar, as that would lead to sell offs to pay for that said margin increase. Imagine a snowball that starts rolling and turning into an avalanche. The avalanche being investors selling because the width between the italian debt and the german debt keepson increasing due to the avalanche itself forcing the italian yield up. It's perhaps not odds on to happen, but it is certainly a possibility.

One should also mention that this easily also means that repayment of Italian debt gets so expensive that Italy can't realistically finance itself in the marketplace. There is no magic limit for when it can't realisticaly finance itself anymore, but it is widely considered by most to be at around 6.5% on the 10Yr. If Italy would enter into even a mild recession I believe that figure to be a lot lower. It would simply just spiral out of control. The big cuts necessary in public spending to get the Italian economy have a great chance of at the very minimum throwing Italy into a zero growth scenario. It is not very likely that Italy itself, the rest of Europe, or the world for that matter will help Italian growth happening. There is no growth wand in the real economy. We don't have bots for that yet.


The consequence is that Italy very possible will need grande support from the funny funny EFSF or IMF or whoever decides to get on the "white horse". Their banks, that hold most of the italian debt will be wiped out. They can raise all the capital they want, it is not going to be fractionally enough.

One problem here should worst come to worst (based on the above):... There might be issues with haircuts on Italian debt here as we are talking in-need-of-painkillers sums of money and already most likely undercapitalized banks. I believe the finance industry lobby would have a hard time deciding on that one and as always the politicans will try kicking the dead can for another bounce. A hard default could happen, triggering the not so funny CDS'es that might send the whole world on a not-so-merry-go-unlucky ride for some time.


Troubeling times indeed, but stay tough, stay focused and invest well! GL!!!

Shvanztanz's picture

Thanks for that explanation. It makes sense. What will happen when what you described happens, but even though it is obvious that it is arbitrarily forced on private investors, it is declared voluntary and therefor not a credit event to trigger CDS? 

Capire's picture

Why is 450bps the magic number?

nope-1004's picture

What's magic about 450 bps?  Is there some type of formula or known level being 450?

Curious to know why 450 and not 500, for example.


nugjuice's picture

450 bps has been quoted by LCH. Clearnet to be a key level indicating increased sovereign risk which would lead them to raise margin requirements. Since they clear about half the interest rate swaps and a large portion of bonds and repos, this means that a LOT of people (read: banks) will be caught with their pants down should the 450 bps spread hold.

Chappy's picture

Just discovered TVIX the other day.  Already made a few bucks day trading.  It's not leveraged like my shorts and 20 seems to be the low end of where it trades.  So I think it is a good bet!  I am going in hot this weekend.  Hopefully I won't ruin it for you.

Divided States of America's picture

Looks like Super Mario needs his trusty sidekick Yoshi to come to the rescue.

Xtreeeme's picture

Super Mario needs his mushrooms... o wait.. he might already be on them

prains's picture

Told Ya the 5 hole was open


KlausK's picture

Not quite "bella figura" ...

Matt1973's picture Euros

Miss Expectations's picture

OFF TOPIC...Volcano video...El Hierro...Canary Islands...venting from ocean

Doña K's picture

Seismologist have predicted that the west side of the volcano will slide into the ocean a la St. Helens and create a enormous tsunami to hit the SE coast of the US.

That's not if, its when. Goodby FL to SC coastal areas. Looking fot the link.

Randall Cabot's picture

Thanks, but the sound nearly blew out my ear drums when it first came on.

sabra1's picture

the epic floods in taiwan have killed off the major food source, rats! rats have to be imported from other oriental countries! delicious!!!!

Randall Cabot's picture

If you ever visit downtown Philadelphia, don't look down if you are walking across a plank over a trench in the street.

Hephasteus's picture

Told you. Computers going off on 11-10-11 and I'm not turning it back on till either earthquakes stop or electronics stop frying or whatever the hell is going to happen happens.

Enceladus's picture

Been following this for awhile, here are some links Sat pics current earthquake list  Great volcano blog

local reports from the island itself

But don't forget the sun!!

CHANCE OF FLARES: NOAA forecasters have upgraded the chance of X-class solar flares today to 20%. The source would be AR1339, one of the biggest sunspots in many years. The active region rotated over the sun's eastern limb two days ago and now it is turning toward Earth.


Mike2756's picture

wow, that is new, they were concernd that if it moved intoo shallower water, there would be an explosive eruption.

Ancona's picture

Berlusconi better start heading for the bunga bunga bunker.

Dick Darlington's picture

Massive bear flattening in Italy curve.

SheepDog-One's picture

30 minute monetization stick-save halflifes? Oh this isnt lookin too good.

Gene8696's picture

How can I short the ES?

drivenZ's picture

buy ticker "SH"...for the most basic way to short S&P

junkyardjack's picture

Or short the SPY for more liquidity

vote_libertarian_party's picture

This plus the 50,000 accounts at MF getting margin calls TODAY (per Reuters) will make for an interesting roller coaster ride today.

pendragon's picture

ecb money well spent...

NOTW777's picture

money down the rat hole

HD's picture

Default rate: 29.99% APR not to mention the $39 over the limit fee.

Xtreeeme's picture

Don't worry.. next rumor coming up in 3..2..1

NOTW777's picture

just wait til the EUR trap door at 1.36ish is opened

Cone of Uncertainty's picture

Oh 88.94

Better try again asshats.

tmosley's picture

It's taking exponentially more intervention to maintain the ponzi.  How much longer can it last?

john39's picture

until the printers are exposed or blow out.

Jim in MN's picture

Does Italy have nukes?  No?  Fuck 'em then.


(psst) All they have is 2,000 years of blackmail material stashed in the Vatican.


BELLA ITALIA!  We are with you!!!

sabra1's picture

they've got pukes! big fat hairy horny women! picture an italian janet napolitano!

NOTW777's picture

bear flag on spx broken - push it

traditionalfunds's picture

Can't shake the sense that there is a Dow down 1000 day coming soon.