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EFSF, Spain, Belgium, Greece And Hungary Issue Bills; Deposits With ECB Pass Half A Trillion

Tyler Durden's picture


The good news out of Europe is that despite the long-overdue downgrade 4 countries plus the EFSF issued debt successfully, namely the EFSF as well as Spain, Belgium, Greece And Hungary. The bad news is that all of the debt issued was Bills, which at least for now is not an issue when it comes to market access as the market believes that LTRO cash will cover anything with a sub-3 year maturity courtesy of the LTRO, even if in reality nobody is using the LTRO for debt roll purposes and all auctions are net cash withdrawing from the system. In brief: the EFSF sold €1.5 billion in 6 month bills at a 0.2664% yield and 3.10 BTC; Spain issued €4.9 billion out of a €5 targeted in 12 and 18 month bills, which priced better than the last such auction from December 13, at mixed Bids to Cover; Belgium raised €1.76 billion in 3 month bills at a higher yield or 0.429% compared to 0.264% before and in line BTC as well as €1.2 billion in 12 month Bills at a 1.162% yield compared to 2.167% and a lower BTC; Greece bill yields fell at a 3 month bill auction to 4.64% vs 4.68% before, selling €1.625 bn with €1.25b in competitive auction, meeting maximum competitive auction target of EU1.25b and so on. The picture is simple: when it comes to funding itself, Europe is great at ultra-short term debt, and not so good at anything longer. Regardless, Europe will spin this as a great success considering the S&P downgrade over the weekend. We'll wait to see how bond auctions longer than 5 years will fare, if of course any non-Bill auctions are conducted in Europe in the future. Some other good news came from the German Jan. ZEW confidence index which came at 28.4 vs est. 24.0. The result is that the expected EURUSD short covering has kicked in, and the pair is flirting with 1.28, as we get recoupling between asset classes. Bottom line: ultra short term debt and a rise in confidence is sufficient to push futures up by about 11 ES points. In the meantime, as the chart below shows, we get another record high parking of cash by European banks with the ECB at €502 billion, as the European superstorm - the failure of Greek restructuring talks - is about to hit, and banks have to prepare for the unknowable. Also, today we will likely see S&P begin downgrading hundreds of European banks and insurance companies. But that to is surely largely priced in.


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Tue, 01/17/2012 - 08:35 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

CDS is about to be unveiled...

Tue, 01/17/2012 - 08:42 | Link to Comment Ghordius
Ghordius's picture

Tyler, keep 'em short! The article is perfect, it begins with "The good news out of Europe...". Now, just delete the rest, we don't want to spoil perfection... ;-)

Tue, 01/17/2012 - 08:39 | Link to Comment Irish66
Irish66's picture

Greece default is so last week..China is on fire, rally on.

Tue, 01/17/2012 - 08:46 | Link to Comment jcaz
jcaz's picture

ROFLMAO!  Yeah, China will save everything.....


Tue, 01/17/2012 - 09:35 | Link to Comment agent default
agent default's picture

Yeah, China will save everything, including them selves.

Now you can laugh.

Tue, 01/17/2012 - 08:46 | Link to Comment new game
new game's picture

all good, lite a cigar, relax and get down to it...

Tue, 01/17/2012 - 08:47 | Link to Comment disabledvet
disabledvet's picture

I have no doubt The Sphinxer wakes up every day...sees what Europe is doing...and says "hmm, never thought of that." I agree...good article. Instead of blindly prognosticating failure your beginning to understand when living in the world of fiat money nothing really "ends" if done..."right."

Tue, 01/17/2012 - 08:49 | Link to Comment westerman
westerman's picture

This is like paying your creditcard bill with another credit card. Short term borrowing to pay back short term debts that just matured. Ponzi.

The LTRO has one huge fault. PIIGS can't pay their current debt, how can they pay in three years plus the interest? If LTRO money is leant att 5% over three years that means that an even bigger loan is needed in three years.

Tue, 01/17/2012 - 08:50 | Link to Comment cossack55
cossack55's picture

Yes, but by then they can pay off with pocket change since it will take $2 billion for an egg.

Tue, 01/17/2012 - 08:56 | Link to Comment Ted Baker
Ted Baker's picture


Tue, 01/17/2012 - 08:58 | Link to Comment bobola
bobola's picture

baltic dry index still heading south;

yield on a 1 year Greek bond still heading north;

i have a bad feeling about this...

Tue, 01/17/2012 - 09:00 | Link to Comment fonzannoon
fonzannoon's picture

Good points but rest assured it is priced in.

Tue, 01/17/2012 - 09:02 | Link to Comment roy10
roy10's picture

If you actually look at the yield, it's clear that a default is priced. Greece is no longer relevant to markets.

Tue, 01/17/2012 - 11:05 | Link to Comment vote_libertaria...
vote_libertarian_party's picture

What is relevant is billions in assets (Greek bonds) at par on balance sheets all over the world are about to be written off.


Mark-to-fantasy is good for assets that exist but once they are formally disavowed by the Greek gvt...

Tue, 01/17/2012 - 09:01 | Link to Comment roy10
roy10's picture

Greek default has been priced for a while now. Won't affect markets. Move on.

Tue, 01/17/2012 - 09:16 | Link to Comment JPM Hater001
JPM Hater001's picture

Looks bullish to me.

Tue, 01/17/2012 - 10:01 | Link to Comment RiverRoad
RiverRoad's picture

Downgrade 'em all. There are too many damn banks out there and their overcompeting created this mess.  The faster they consolidate the better....or is consolidation for everyone but the banks?

Tue, 01/17/2012 - 23:17 | Link to Comment StychoKiller
StychoKiller's picture

Wrong-way Corrigan, is that you?  What's needed is more, smaller banks, not fewer LARGER banks.  Competition didn't cause these problems, lack of oversight did.  Check yer premises.

Tue, 01/17/2012 - 11:11 | Link to Comment Miles Kendig
Miles Kendig's picture

Will LTRO maturity be extended to 10 years on February operation?

Highlights at 11

Fri, 04/06/2012 - 02:56 | Link to Comment kevin22
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