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ECB Intervenes: Briefly Brings Italian Yields Under 7%... And Sends French Yields To Fresh Record Highs

Tyler Durden's picture


ECB is back to playing Whack-a-mole. Just as BTPs seemed poised to collapse to new all time records, and yields reenter the stratosphere, the ECB stepped in aggressively bringing the yield to just under 7%, at 6.996% last, however briefly. The problem, as pointed out previously, is that now the vigilantes will simply focus on those bonds where the ECB can not spoil the party. Such as France. French OATs just hit a fresh all record yield, and low price as technocratic NWO is scrambling to find a third Mario, who just so happens to be is a Goldman and Fed alum, to take over Sarko and head France.

Some more observations from Peter Tchir:

I know spread to bunds is a more relevant measure but when German 10 year hit 1.745% and French 10 year yields hit 3.49% it was too hard to resist pointing out.

Mr. Sarkozy's reckless abandonment of fiscal prudence in any form is starting to have real consequences.  I'm sure he won't pause and change policies since it will be obvious to him that it is evil speculators and not his EU policies nor the French banks' bad decisions nor his bailout of Dexia  that have led to this divergence.

In CDS land - to the extent it is still relevant - Germany was trading around 95 and France was over 200, but I think Finland and the Netherlands are more interesting. Finland was trading at 65 - so 30 better than Germany and Dutch CDS was at 105 so only 10 wider than Germany.   The credit markets are rewarding the prudent. Finland has been the most conservative in the bailout rush, but Holland has also shown some restraint, and the market is aware or it, and is rewarding them as they should be rewarded.  

This isn't an "attack" on France or Italy - it is the fear that a small pittance of interest isn't enough to cover the default risk. France is still fine and relatively tight but is a clear indication that rhetoric and bailouts have a cost. With Dexia CDS still wide it's not even clear what Belgium and France did or got from that intervention.

We are due for an ECB massive purchase program rumor at any moment - but I think it is still too early and not enough other steps have been taken to get Germany on board.

The ECB is likely considering an emergency rate cut but I'm guessing are reluctant because it would indicate a bit of panic (they are in panic mode - they just don't want to indicate it) and there may be real concern that if they do another rate cut and sovereign bond yields don't respond (they did NOT respond for long after the recent one) they will lose a possible tool. It may be better to keep it in reserve and pretend they can cut rates and impact the market, rather than cutting and risking failure.

I can't help but think French yields may start to impact corporate yields - I'm not a big fan of their policies, but bunds + 175 is at least a little intriguing. Unlike Italy and Spain which might compete for some HY allocations, this could compete directly with some corporates.


ECB intervention:

OAT price:

OAT yield:


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Tue, 11/15/2011 - 08:34 | 1878608 wang (not verified)
wang's picture

according to Vonnie Quinn on Bloomberg

"srpeads are off their widest points of the day"


I think she is well on her way to a gig with CNBS

Tue, 11/15/2011 - 08:35 | 1878612 AngryGerman
AngryGerman's picture

she was referring to another kind of spread, and that one certainly will land her a job at cnbs

Tue, 11/15/2011 - 08:38 | 1878622 wang (not verified)
wang's picture

to make matters worse the "King of Wall Street" Barry Ratholtz is filling in for Keene

Tue, 11/15/2011 - 08:50 | 1878657 Snidley Whipsnae
Snidley Whipsnae's picture

Whack-a-Mole... another form of kicking the can down the road... What is accomplished?  One more day for banksters to bask in the sunshine.

As the can is kicked it is gathering mud... mud is hardening... more kicking more mud more hardening... can begins to resemble a big granite boulder.

Gazing into my Magic Shop crystal ball and observing the ass holes of the two cats that own me I can see a time when all the bankers in the world will not be able to move the granite boulder... advanced technical analysis.

Tue, 11/15/2011 - 08:40 | 1878625 markmotive
markmotive's picture

According to Steve Keen we should have seen all this coming in 2001.


Tue, 11/15/2011 - 08:41 | 1878631 paarsons
paarsons's picture

I like your tits, Angry German.

All I have is a bag over my head. 

Tue, 11/15/2011 - 08:49 | 1878653 AngryGerman
AngryGerman's picture

like her. don't want to loose focus, pay only attention to important aspects of her

Tue, 11/15/2011 - 08:53 | 1878665 Snidley Whipsnae
Snidley Whipsnae's picture

"All I have is a bag over my head."


I thought all you bag heads were NO Saints fans... Or, as they were called when losing every game was the norm... "AINTS"...

Tue, 11/15/2011 - 09:04 | 1878689 Zgangsta
Zgangsta's picture

Isn't "Angry German" kind of redundant?

Tue, 11/15/2011 - 08:36 | 1878614 paarsons
paarsons's picture

Here's the real question!

Will Vonnie Quinn give me a hummer?

She sounds quite sexy.

Tue, 11/15/2011 - 08:41 | 1878630 Sequitur
Sequitur's picture

Does it look like Becky Quick jammed her face full of Botox? Look at that upper lip . . . .

Tue, 11/15/2011 - 08:44 | 1878638 wang (not verified)
Tue, 11/15/2011 - 09:01 | 1878681 slaughterer
slaughterer's picture

EUR/USD 13 pips from being Stolper stopped.   No bonus for Stolper this year. 

Tue, 11/15/2011 - 08:35 | 1878609 achmachat
achmachat's picture

at least it makes for some good entertainment for us...

Tue, 11/15/2011 - 08:45 | 1878642 homersimpson
homersimpson's picture

And money for FAZ owners.. *w00t*

Tue, 11/15/2011 - 10:04 | 1878847 achmachat
achmachat's picture

I stopped everything paper around two years ago when I figured out that nothing follows market logic. It is way too risky to bet against the house. The house always wins. They set the rules.

Tue, 11/15/2011 - 08:37 | 1878610 paarsons
paarsons's picture

Good Citizens of Metropolis!

We're fucked.

But let's look at it as a Rosy Cruxifixion.

And least we can still get drunk and high.

Something to be said for that.

Tue, 11/15/2011 - 08:37 | 1878617 apberusdisvet
apberusdisvet's picture

As much as we like to deride the French for their seeming apathy in matters of either military offense or defense, I doubt that they will roll over for the fascists as it appears that the Italians and Greeks have done.  The proud "resistance" to all things fascist might put a crimp in the NWO agenda of sovereign stripping.

Tue, 11/15/2011 - 08:38 | 1878620 AUD
AUD's picture

The ECB will cut its overnight rate, it has no choice, all central banks must follow the Bank of Japan & the Fed.

Tue, 11/15/2011 - 08:41 | 1878628 AngryGerman
AngryGerman's picture


Tue, 11/15/2011 - 08:39 | 1878624 Al Gorerhythm
Al Gorerhythm's picture

Save us Mario. Save us!

Tue, 11/15/2011 - 08:41 | 1878629 Comay Mierda
Comay Mierda's picture

what is the half-life this time? i'm betting <20 min

Tue, 11/15/2011 - 08:42 | 1878633 Paralympic Equity
Paralympic Equity's picture

Tyler look at GILGBE10 Index - DEGGBE10 Index, and add this spread to the GBTPGR10 Index...and there you have the non ECB distorted Italian 10Y yield

Tue, 11/15/2011 - 09:15 | 1878707 BarracudaBourse
BarracudaBourse's picture

Hi, I'd love understand this better, could you please elaborate a bit more ? thx

Tue, 11/15/2011 - 09:54 | 1878801 Paralympic Equity
Paralympic Equity's picture

GILGBE10 Index and DEGGBE10 Index are the italian inflation breakeven and german inflation breakeven rates respectively. They are the difference between the nominal yields and yields on the inflation linked 10Y bonds.

The two indexes where of the same value till the ECB started buying the 10Y bond, and that is why the italian inflation breakeven rate is falling signaling that the ECB is not buying the inflation linked 10Y bonds.

The difference is now 115 bps, and that should be added to the Italy 10Y gross yield which amounts to more than 8% in gross yield.

If my assumption is not true, that would mean that it is a bargain to buy inflation linked bonds because inflation in Italy will be more than 25 bps, right? But that is not the case, the gross 10Y yield is distorted by more than 1% by the SMP.

The widening difference between GILGBE10 Index and DEGGBE10 Index is correlated with the SMP buying

Tue, 11/15/2011 - 13:31 | 1879562 BarracudaBourse
BarracudaBourse's picture

Thanks for this, much appreciated ! 

Tue, 11/15/2011 - 08:51 | 1878640 Mediocritas
Mediocritas's picture

Markets are moving faster than the ECB can (legally) adapt. Seeing as the ECB has already demonstrated willingness to break the rules governing its own behaviour (for example, accepting PIIGS debt as collateral on loans to the same PIIGS in violation of Basel II), I'm expecting that it simply starts engaging in unconstrained OMO, Fed style, and leaves a trail of litigation behind it. Justification will be that failure to act causes more damage than acting without permission, German inflation fears be damned.

Germany isn't going to like it one little bit.

So we're down to the final two players in high-stakes poker. The ECB can't afford to fold, it has already committed most of its chips so it has to go all in now, there's no other choice. In response, will Germany fold (allow ECB easing) or call (leave the euro)? (My bet is they fold, but they doomsday puts will enjoy the fucking fireworks with popcorn at hand if they don't).

Tue, 11/15/2011 - 09:02 | 1878686 Non Passaran
Non Passaran's picture

A hell of a question. 

After many months of on-and-off thinking my latest theory is that they'll pick some semi-weird scenario that most people aren't expecting just so that they pay less on exit and take everyone by surprise. Or it's just a logical outcome of everyone trying to settle around some sort of compromise.

For example, it could be a mix of that seniorage idea, ECB printing and at the same time asking for gold reserves as collateral. But what the heck do I know. Anything can happen.

Tue, 11/15/2011 - 08:47 | 1878645 PaperBear
PaperBear's picture

That's it ECB, perpetuate the pyramid scheme that little bit longer..

Watch 'Occupy London: Are they wasting their time?'

ex-investment banker Simon Dixon explains how f**ked we are by our current monetary system of fractional reserve banking but then at 27m30s into the video he states that some assets are debt and that there is no reserve and that before the 2008 financial crisis Goldman Sachs was leveraged at 365 to 1THEY HAVE GOT TO KIDDING, that’s 1 for every day of the year.

At 34m into the video he explains that the UK people last had the money power back in the 1844 reforms through the Bank Charter Act.

At 47m30s into the video Simon says “the not-for-profit organisation Positive Money has drafted legislation to get us out of this system and they wrote a letter to Mervyn King and Mervyn King said, his response was: ‘Of all the banking systems that we could currently have the worst is the one we have right now.’ – he understands the theory of 100% money and fractional reserve banking, he gets, not may other people do.”

Tue, 11/15/2011 - 08:48 | 1878649 paarsons
paarsons's picture

Good night, ladies.

It's 10 p.m. here in Korea.

I must say my prayers, smoke a cig, and go to bed.

May the Lord bless you and keep you all.

Brothers and sisters, it's just fucking money.

Don't take the whole ponzi scheme too seriously.

Tue, 11/15/2011 - 08:48 | 1878650 tim73
tim73's picture

Residual speculation from New York/London (or whatever is left of those investment banks). Tough austerity measures imposing countries are getting punished with more than inflation rate yields while money printing, drunken sailor buddies UK/USA are getting rewarded with less than inflation rate yields.

That can last only until the next set of QEs fails badly and markets do not want any US/UK bonds anymore. Then it will be Whack-A-Inflation-And-Unemployment-Moles for both countries...

Tue, 11/15/2011 - 08:50 | 1878655 Peter K
Peter K's picture

Dont' need no Mario. Any Gunther or Dietier will do:)

Tue, 11/15/2011 - 08:54 | 1878667 Peter K
Peter K's picture

And a tiny digression. Wasn't DeGaulle's dream of having a Germanic administration ruled by the Galls for European continant?

Tue, 11/15/2011 - 08:53 | 1878663 Anomalous Howard
Tue, 11/15/2011 - 08:58 | 1878668 disabledvet
disabledvet's picture

The fact that the CDS contract has been invalidated makes it MORE relevant than ever, not less since "HOW WILL THE EURO ZONE BE RE-LIQUIDATED?"!!! "What has value to you Maria?" was what a friend of mine asked his wife as she left him. And so it is to me vis a vis Europe. "What has VALUE to you Europe?" When i think of Germany in this context I can't help but think of some woman in a heavy German accent saying "evvvverding, darrrrrling." But this is economics, not a wish list from Marlene Dietrich. We are forced by the Laws of Scarcity to make CHOICES. "Having it all" is "not a choice" but a want, need or desire--an egotisical claim that in this instance ("of what is this instance?" is of absoulute critical importance when trying to understand the actions and motives of others especially relative to economic thinking) leads to a continuation of the financial Bucky-ball. CUT GREECE LOOSE NOW!

Tue, 11/15/2011 - 08:55 | 1878670 Cursive
Cursive's picture

technocratic NWO is scrambling to find a third Mario, who just so happens to be is a Goldman and Fed alum, to take over Sarko and head France.


Goldman = Red Shield


It's like I'm watching a remake of "The Money Masters".

Tue, 11/15/2011 - 09:11 | 1878702 RoadKill
RoadKill's picture

Gotta wait for the ESFS to run out of $ before this collapses. Thought I told you that before! I put on more SMDD at 18 and FAZ at 40 on Friday. May take some off today. It's not time to be 100% in yet. I was 60% in Thursday, took it to 75% Friday. Will prob take it to 65%-70% today. It's all tweaking around the edges and trying to make up some losses from putting the position on at 22 and high 40s, and doubling down at 20 and low 40s.

The name of the game is capital reserves. Without them, you can't piss I'n the tall weeds with the big dogs.

Don't go all I'n until you feel comfortable writing calls. Just like I didn't go long until I felt comfortable selling puts on FAS at $4 for $1 each!

Tue, 11/15/2011 - 09:21 | 1878715 michaelsmith_9
michaelsmith_9's picture
The ECB can only contain yield for so long before the market wins the battle.  Higher yields will put heavy pressure on equities and will likely strengthen the USD.
Tue, 11/15/2011 - 09:44 | 1878775 common_sense
common_sense's picture



- FED & ECB:  GO HOME !!






Tue, 11/15/2011 - 10:32 | 1878980 Zero Debt
Zero Debt's picture

I'm with you but please don't make those local currencies issued by central banks at interest, make it debt-free money and legalize competing means of exchange.

Tue, 11/15/2011 - 10:15 | 1878908 rambler6421
rambler6421's picture

I knew this would happen.  ITalian yields go down, and the other yields will go up (France, Portugal, etc).  This Ponzi Scheme is ready to burst.

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