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BTPs Breach 87 Support, 86.955 Last, ECB Makes A Political Statement By Not Intervening

Tyler Durden's picture




 

Everyone hoping the ECB would step in today and buy Italian bonds... has been disappointed. Has Draghi finally decided to make a political statement and kick Berlusconi out by send the 10 year to new all time lows? So it would appear: the 10 Year price just dropped below 87 for the first time, and the Bund-BTP spread rapidly approaching the LCH margin hike-inducing level, last at 490 bps.

 

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Tue, 11/08/2011 - 11:39 | 1856480 LuKOsro
Tue, 11/08/2011 - 11:46 | 1856529 trav7777
trav7777's picture

germany and france hanging those wops out to dry...southern greaseball effeminate euro countries take note

Tue, 11/08/2011 - 11:47 | 1856532 redpill
redpill's picture

Hide your bridesmaids!  Silvio won't be happy about this.

Tue, 11/08/2011 - 11:41 | 1856488 RobotTrader
RobotTrader's picture

Bond prices can't go down forever.

Eventually there is going to be an absolutely vicious squeeze that will catch the bears offsides.

Tue, 11/08/2011 - 11:45 | 1856522 Quintus
Quintus's picture

No, I guess they can't go down forever.  They'll always fetch something on Ebay as curiosities that people can frame and keep on the wall as a reminder that governments do fail, and the debts they issued often die with them.

Tue, 11/08/2011 - 12:00 | 1856596 I Got Worms
I Got Worms's picture

Just like my framed Zimbamwen $10/20/50/100 Trillion bills!

Tue, 11/08/2011 - 12:35 | 1856756 Biosci
Biosci's picture

Technically he's right.  They should asymptotically approach zero as interest rates go to infinity, right?  Though I guess there's still profit to be had from shorting as rates go from infinity minus two to infinity minus one.

Tue, 11/08/2011 - 12:29 | 1856737 trampstamp
trampstamp's picture

Just like stocks can't go up forever either.

Tue, 11/08/2011 - 11:46 | 1856525 drivenZ
drivenZ's picture

"Bond prices can't go down forever."

 

ask Jon Corzine how that logic is working out for him

Tue, 11/08/2011 - 12:10 | 1856654 tgmur10
tgmur10's picture

LOL! That just got the coffee coming out the nose  hehehe

Tue, 11/08/2011 - 11:47 | 1856530 dbach
dbach's picture

They sure can. What assets back these sovereign bonds?

Tue, 11/08/2011 - 11:59 | 1856589 CClarity
CClarity's picture

Right.  If people (investors) aren't stepping up to buy the acropolis or Santorini, what makes you think they'll buy the colloseum or Capri?

Tue, 11/08/2011 - 11:47 | 1856537 Ethics Gradient
Ethics Gradient's picture

Does that translate to "On a long enough timeline the European economy will perk up a bit"?

Tue, 11/08/2011 - 12:10 | 1856550 Ethics Gradient
Ethics Gradient's picture

Incidentally, it seems we are .6 of a bps away from a margin hike.

Edit: Timberrrrrrr!

Edit 2: A bit premature. Someone is selling Bunds. Hmmm.

Edit 3: Are the ECB allowed to buy Bunds from banks at a premium behind closed doors and then sell them back on the open market? That's not against policy is it? If this is happening I would have thought that this would have attracted the attention of Bunga Bond holders: "Well then, we have a buyer of Italian crap at a premium who is also selling German wunderbunds at a loss...can't miss out on that...."

Edit 4: Capitulation, baby. Game over. The ECB has apparently reached the limit of it's endurance. Both bonds heading in their natural directions...

Tue, 11/08/2011 - 11:49 | 1856546 A Man without Q...
A Man without Qualities's picture

"Like a child that wanders onto a film set..."

Tue, 11/08/2011 - 11:49 | 1856549 mac768
mac768's picture

sure, when we are at close to 0 deg Kelvin, 0.00001 from absolute zero

which is still some way down

Tue, 11/08/2011 - 11:51 | 1856551 Dr. Engali
Dr. Engali's picture

What are Greek bonds selling for?

Tue, 11/08/2011 - 11:57 | 1856580 Roland99
Roland99's picture

Good question. But holding out for a gyro is no type of sound fiscal policy!

Tue, 11/08/2011 - 11:54 | 1856563 CvlDobd
CvlDobd's picture

This has been a mainstay of trader folklore. We old time traders call it October.

Tue, 11/08/2011 - 12:01 | 1856600 WonderDawg
WonderDawg's picture

Whereas the rest of us call it November.

Tue, 11/08/2011 - 12:16 | 1856678 hyper-critical
hyper-critical's picture

Can't wait for that trade. Tin-hat wearers are going to be sorely disappointed that they have the end-game timing way off.

Tue, 11/08/2011 - 11:41 | 1856490 Conrad Murray
Conrad Murray's picture

ECB waiting for a better entry point. Stick with Draghi

Tue, 11/08/2011 - 11:43 | 1856493 rosex229
rosex229's picture

So there is no EFSF expansion, the ECB will not print, and italian yields are about to go through 7 percent. yet the dow is 1400 points above the lows set 2 months ago... I'm perplexed and truly give up

Tue, 11/08/2011 - 11:43 | 1856504 qussl3
qussl3's picture

Wil-e-coyote comes to mind.

Tue, 11/08/2011 - 11:54 | 1856562 hack3434
hack3434's picture

Corps are issing gobs of debt and some of that money is flowing into share buybacks. 

Tue, 11/08/2011 - 11:57 | 1856578 Ragnar24
Ragnar24's picture

exactly. Nearly every rumor that drove the market higher has since been refuted (or is now watered down)... logic would suggest that the market would return to pre-rumor levels; therefore, US equity markets must be illogical (or the Bernank has shifted its allocation to equities). 

Instead of giving up, I just scheduled my lobotomy.

Tue, 11/08/2011 - 11:42 | 1856497 qussl3
qussl3's picture

France's AAA is next.

Tue, 11/08/2011 - 11:42 | 1856498 campag
campag's picture

OK Italian PM wins vote so saves face but will resign at 3.00pm to spark stock melt up . Can see a balistic last hour .

Tue, 11/08/2011 - 11:46 | 1856523 Non Passaran
Non Passaran's picture

Tyler, FT Alphaville recently commented on the BTP-Bund spread claim saying it's actually a weighted mix of German, French and some other (Dutch, IIRC) bond yields that LCH uses.

Tue, 11/08/2011 - 11:46 | 1856524 mac768
mac768's picture

... and the sheeple follow the S&P 500 and the HFT higher as usual

Tue, 11/08/2011 - 11:46 | 1856526 Tom_333
Tom_333's picture

Don´t bank on it.

Italian culture and politics are quite ...sophisticated...and complicated. Half of the times no one knows what´s really going on.To imputate that it´s possible to connect the wild gyrations in the markers with communicated news seems to me to be a logical fallacy. I as much as anyoneelse would really like for someone to be able to explain what the hell is going on but...I can´t see there´s one theory that covers this trip in unchartered territories.

Maybe we are stuck in this moneyprinting hell forever?

Tue, 11/08/2011 - 12:45 | 1856763 Leopold B. Scotch
Leopold B. Scotch's picture

Perhaps, but that's a fast path to Zimbabwe $$ & economy. 

Don't forget about the deeper problem of monetary and credit inflation: it rearranges the economy away from efficient compounding production and obfuscates logical price discovery.  Net = less wealth / wealth destruction, poorer people.  Confining the discussion purely to price inflation misses THAT real problem.

And we should not forget why money printing is illegal for you or me:  those closest to it get to benefit from it at the expense of everyone else holding said currency.  Also known as THEFT.  The authorities have merely legalized a counterfeiting mechanism that benefits core Wall Street, all banks, and especially D.C.

Tue, 11/08/2011 - 13:27 | 1856947 Tom_333
Tom_333's picture

That begs the question - how much can be printed when the paper stays with different dealers and do not reach Joe Sixpack.Hence there is no velocity. The only velocity there is seems to be with the the HFT bots.Heck - no one even knows how big holes there are to fill in all those balance sheets...

So can you give us a guesstimate of how much can be printed before we see any real broad rapid consistent inflation? How many gazillions... 1 or 10 or what?

Maybe we have progressed to Krugman´s Hell with Central Banks feeding dealers that pursue automated trade with each other and the rest is.....just stuck on go.

Tue, 11/08/2011 - 17:45 | 1858380 Leopold B. Scotch
Leopold B. Scotch's picture

Velocity is overrated. 

All it takes is for the masses to have a Wile E. Coyote moment, and all hell breaks loose.

But to your point, they keep playing that game, the economy collapses under itself since prices aren't being allowed to clear at anything remotely tied to reality.

Hence, they need the consumer to have more cash in pocket to drive action, which will leak $$'s into the system and start driving prices. Helicopters will come.

Tue, 11/08/2011 - 11:47 | 1856533 PivotalTrades
PivotalTrades's picture

Stocks represennt pices of companies that can and will reprice their products to capture the upcoming inflation. Few other assets have that ability.

Tue, 11/08/2011 - 11:49 | 1856548 Quintus
Quintus's picture

This isn't the 1970's.   Salaries are not keeping pace with inflation anywhere.

Companies can certainly reprice their products, but they won't sell many after a while.

 

Tue, 11/08/2011 - 11:47 | 1856534 lolmao500
lolmao500's picture

I'll say it again... where are the goddamn margin hikes on Italian debts?

Tue, 11/08/2011 - 11:48 | 1856535 Dr. Engali
Dr. Engali's picture

And the Dax gave up 6,000 again. Stocks can't go up forever sooner or later they run into an absolutely nasty bear that will eventually rip the longs to the downside.

Tue, 11/08/2011 - 11:48 | 1856540 YesWeKahn
YesWeKahn's picture

Risk is still on. Wake me up when the real thing happens.

Tue, 11/08/2011 - 12:00 | 1856599 drivenZ
drivenZ's picture

IMO, for US equities, we're gonna need to see a few really negative US data reports to turn the tide. If they come, and the Euro issues are still hot, the sell off will be large. If the data out of the US stays the course I don't saee a huge move down in US equities regardless of the fiasco in Europe. 

Tue, 11/08/2011 - 12:08 | 1856644 YesWeKahn
YesWeKahn's picture

BernankAsshole still has the weapon of mass US$ destruction, he will ensure that the stock market never drops. His life saving is also in stake.

Tue, 11/08/2011 - 12:45 | 1856786 Rip van Wrinkle
Rip van Wrinkle's picture

data?? data?? What's data got to do with this market? German industrial production - yes, the industrial powerhouse of the world - reports a 2.7% DECLINE for October (expected -0.5%) and the markets in Europe melt up! Now I know the Bernank prints but the German Central bank won't - well, not yet anyhows.

Who Berlesconi took to bed last night has more influence than poxy data.

Tue, 11/08/2011 - 11:49 | 1856547 Ragnar24
Ragnar24's picture

Even though I knew central bankers would freely print, I expected them to wait for a "useful emergency" before doing so.  Now, in light of this 87 breach, Tyler's post on the BOJ is even more telling... the BOJ can just print yen to buy euros to buy BTPs.  How the yen can remain this strong after past and expected printing sessions? I'll never know.

Tue, 11/08/2011 - 11:55 | 1856564 IBelieveInMagic
IBelieveInMagic's picture

Round and round we go -- it is the Japanese turn to print. Apparently, as long as the world is stuck with relative valuation among these swappable currencies the game can go on.

Tue, 11/08/2011 - 11:51 | 1856552 vegas
vegas's picture

Whoops! - Somebody please buy the fucking dip. Please?

 

http://vegasxau.blogspot.com

Tue, 11/08/2011 - 11:53 | 1856559 Lady Heather...UNCLE
Lady Heather...UNCLE's picture

@pivotal trades: you are correct in an inflationary environment. But what about a stagflationary one?

Tue, 11/08/2011 - 11:54 | 1856561 pmcgoohan
pmcgoohan's picture

Welcome to the new market double think.

First we had bad economic data = QE3 more likely = ES up

Now we'll have Italian bond yields up as punishment to Berlusconi = more likely he will get kicked out = ES up

It can only go up! Pure logic! Why I'm shorting this shit into the ground I just can't imagine...

Tue, 11/08/2011 - 11:55 | 1856565 Aunty Christ
Aunty Christ's picture

gonna go a lot lower. Every bounce will be sold into by every "solvent" french bank looking to deleverage...

Tue, 11/08/2011 - 11:56 | 1856572 youngman
youngman's picture

When will the first country say that you can only buy our bonds with gold.....hmmmm

Tue, 11/08/2011 - 12:16 | 1856680 CrashisOptimistic
CrashisOptimistic's picture

That will be when countries don't want to have their bonds sell, and thereby don't want to provide services for the populace.

 

 

 

Tue, 11/08/2011 - 11:58 | 1856585 CrashisOptimistic
CrashisOptimistic's picture

Italy burns 1.7ish million barrels/day of crude.  At present Brent prices that is $71 billion dollars that leave the country this year.  Brent has been north of $100 all year.  This is real money they have to pay to survive.

Italian GDP is a bit under 2 Trillion dollars, and with -1% recession unfolding, it will be 1.8 trillion.  71B / 1800 B = about 4% of GDP drained out of the country annually to buy the black liquid.  That is one hell of a drag.

Everywhere.

Tue, 11/08/2011 - 12:39 | 1856762 Biosci
Biosci's picture

You might be off by an order of magnitude there.  But your point still stands.

Just imagine how deep the recession would be if they didn't import all that oil.  No energy -> no economy.

Tue, 11/08/2011 - 12:01 | 1856603 Lady Heather...UNCLE
Lady Heather...UNCLE's picture

shporting equities means you are undermining the Fed. That institution WILL (and has and is) monetising things. I am a bear but not selling. Melt up to years high before the end on the year is on the cards. But, bears will have their day because of the decoupling of Wall St and Main St. The incomes of the latter are not keeping anywhere near the pace of the printing required to inflate away the problems of the former. Earnings will ultimately suffer and THEN share will fall to earth. But the American consumer is a well conditioned shopper. It could be 6 months-1 year away. Markets can stay irrational alot longer than my capital at risk can last. Sidelined.

Tue, 11/08/2011 - 12:28 | 1856726 Peter K
Peter K's picture

The USSR was run by commisars, and the EurolandSSR is beginning to be run by pseudo central bankers. The commisars lasted 70 years. Wonder how long the CB'ers will last?

Tue, 11/08/2011 - 12:33 | 1856752 edmondantes
edmondantes's picture

lol

* REHN SAYS EU SENT ITALY A QUESTIONNAIRE

!

Tue, 11/08/2011 - 12:48 | 1856801 AldoHux_IV
AldoHux_IV's picture

The new weapon of submission: debt yields.

Tue, 11/08/2011 - 12:50 | 1856814 slewie the pi-rat
slewie the pi-rat's picture

FABULOUS!!!

will bunga understand?  stay tooned, Bichez!

Tue, 11/08/2011 - 13:15 | 1856899 integrale
integrale's picture

This will completely break insurance companies like Assicurazioni Generali.... they're more leveraged than some banks (~$500B assets on ~$30B in equity) and almost entirely invested in sov debt.  They can continue whistling past the graveyard till they have to mark that sht to market. BTP Haircut = absolute disaster. 

 

Tyler - you guys looked into this at all?

Tue, 11/08/2011 - 14:50 | 1857458 ACP
ACP's picture

"Et tu Draghi?!?"

Tue, 11/08/2011 - 16:07 | 1857920 youngandhealthy
youngandhealthy's picture

Go Draghi Go....!!

 

Get rid of tha clown...NOW!

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