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Euro Bank CDS Surge To All Time Record After Collapse In German IFO Business Survey, Discord Over Eurobonds, Greek 2 Years Over 40%

Tyler Durden's picture




 

Following yesterday's plunge in the German ZEW investor confidence reading, today we got yet another confirmation that Germany's economic in freefall, after the IFO Business Climate survey printed at 108.7, the lowest in more than a year, down from 112.9, and a big miss to consensus of 111.0. The 4.2 drop was the highest since November 2008, when it plunged by 4.2. In summary, today’s disappointing Ifo data, if repeated in coming months, points “at least to sharp deterioration of growth, perhaps even recession,” Ralph Solveen, head of economic research at Commerzbank says." And unlike America, where hope is the only thing pushing investors forward, in Germany it is the inverse with the expectations component dropping belopw the 10 year average of 100.5, for the first time since July 2009, while the current assessment component is still above the 102.7 long-term average. Should this collapse in hopium consumption jump across the Atlantic, watch out America. Furthermore, while as was noted before, Merkel's continuing refusal to adopt Eurobonds is nothing new, today we got a new kink after German president Wulff questioned the legality of ECB bond purchases during a conference at Lindau, claiming that bond buying damages the ECB's independence. Wulff cited an article in the European Union's fundamental treaty, which prohibits the ECB from buying bonds directly from governments. "This ban only makes sense if those responsible don't circumvent it with comprehensive purchases on the secondary market," he added. "What independence?" might add anyone who has seen the global printing cartel in action over the past 3 years. Yet the recent expansion in the SMP, which has bought about €40 billion in Spanish and Italian bonds, is the only thing keeping Europe afloat now: if this were taken away, it is the beginning of the end. Another complication to any sustained EUR rally, is that the Finnish government announced overnight it is sticking to its collateral side deal with Greece, a move that apparetly has Germany fuming. Expect headlines as  Finland’s govt will meet this afternoon to discuss Germany’s rejection of collateral agreement the cabinet struck with Greece on Aug. 16, newspaper Helsingin Sanomat reported on its website without saying where it got the information. This may well be worth 200 pips in the EURUSD... to the downside. And lastly, the cherry on top is that Greek 2 Year bonds, just soared above 40% for the first time ever! So much for bailout #2. Time to star pricing in the 4th iteration as the 3rd one is now a certainty. All this means that iTraxx Fins Senior is now at an all time high of 255, +4 bps, while the Sub Index is also at a record of 453, +9bps. Look for a resumption in the serial close of trade of all Italian banks before Europe shuts down at 4:30 pm local.

Here is Goldman's commentary on the IFO:

German companies nicreasingly worried about outlook

 

The Ifo decline to a level of 108.7 in August after a reading of 112.9 in July; a significanlty weaker than expected reading.
At 100.1 the business conditions component of the survey declined back to around its long-term average (99.6).
The assessment of current conditions declined by more than 3 points (118.1 after 121.4) though it remains high on historical standards (long-term average is 101.1).

 

Detailed Commentary

 

The Ifo signals a further softening in economic activity during Q3 as well as an increasing uncertanity of the economic outlook. Translating this into hard data, however, is not straightforward. This is because growth was much weaker in Q1 than signaled by the Ifo - the quarterly average of business conditions in Q2:2011 was the highest on record. Note also in that respect that the diffusion index - the % balance of opion - still stood at a level of 10 in August, implying that a majority of companies assess the current situation and the outlook as "good".

 

We will have to wait for the first hard data for Q3 in order to re-calibrate the business survey's after the weak Q2. For the time being, however, we still see the business surveys being more consistent with a slowdown scenario for the German economy than stagnation or an outright recession.

 

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Wed, 08/24/2011 - 07:31 | 1594379 Badabing
Badabing's picture

Yesterday after the earthquake gold spot lost $40 in 35 minutes as for the whole day 24hr close to $100 from the highs.

Gold’s low yesterday was $1824 at about 4:00 pm eastern time. Also GLD dumped/puked up 31 tons of its holdings from 1290 to 1259

This is exactly what we have been looking for, the bottom is in, time to buy, call your coin dealer and buy before it’s up another $100.

The more of us who see through this scam the better.

 

Yours in gold,

Badabing

Wed, 08/24/2011 - 07:39 | 1594387 speconomist
speconomist's picture

 

Expiry date for futures is not over yet, I would rather wait, maybe there are some margin hikes still waiting somewhere for us.

 

Wed, 08/24/2011 - 07:53 | 1594420 Badabing
Badabing's picture

True dat, but don’t be nickel and dimed while gold trades sideways till Friday and then miss the boat.

Wed, 08/24/2011 - 07:56 | 1594425 Drag Racer
Drag Racer's picture

I agree. I think the drop is due to high expectations or even knowing of a margin hike. Maybe just the fearful propaganda puched by the MSM about the 'golden bubble' but I doubt it. Just too much negative outlook for wealth havens plus the Chavez thingy....

After the 'stunner' at JH it will rocket up. and by stunner I mean it won't be what the market expects at all.

Wed, 08/24/2011 - 08:16 | 1594456 Snidley Whipsnae
Snidley Whipsnae's picture

Big beat down of gold is ongoing before Ben talks Friday... plus options expiry on Thursday...

If their best shot takes gold down only ~ 80 bucks then they don't have much control left...

Europe blowing up yet again... Jawboning by TPTB in Europe is not working cause they have gone to the well too many times...

Cover your ears and brace yourself for the big noise... The blast shock wave will be arriving from the East across the Atlantic... be a good boy/girl scout and be prepared... get physical PMs...

Wed, 08/24/2011 - 08:04 | 1594441 slaughterer
slaughterer's picture

If you do not think that German ZEW and IFO was massaged lower to justify (i.e. blackmail BB into) QE3, then you are being played by the trickiest player in Europe: the German government.  This is their way of outsourcing EuroRescue 2.0 to the "Ami Wunder Team": "OGolfer", "Der Bernanke", and "Zodiac Turbo"  and making sure, in the process, that the German taxpayers do not start purchasing pickforks, torches and rope en masse for the September Bundestag debates.    

Wed, 08/24/2011 - 17:30 | 1596780 LookingWithAmazement
LookingWithAmazement's picture

With a better-than-expected durable goods index, it appears a new boom is about to happen. Forget all the doomers, up up up for the markets.

Wed, 08/24/2011 - 07:33 | 1594381 hugovanderbubble
hugovanderbubble's picture

Short Australian,Canadian and UK banks...

 

European are toasted and fried

 

UK IS NOT AAA rating...its the biggest lie on earth...

Sterling is in default-Crappy currency.

UK will face the biggest crisis ever next 2012

 

Dont hold any debt in UK bonds and corporates.

UK must pay the farce in offshore accounts.

Wed, 08/24/2011 - 07:40 | 1594392 speconomist
speconomist's picture

 

CEBO (Credit Event Binary Options) for everyone!!!

Any broker offering CEBOs?

 

Wed, 08/24/2011 - 07:46 | 1594406 hugovanderbubble
hugovanderbubble's picture

First to Default Basket Structured Products increasing inflows... last 6 months....(hedged by raising gold price)

Not just in Governments,

I agree to open range products with digital ,barrers and binaries, but who gonna price them....too dificult sir... bid/ask spread will be abismal.

Now in Subgovernments, Munibonds and for Example Comunidades Autónomas ....

The problem are not just governments are SUBGOVERNMENTS INFINITE DEBT

Wed, 08/24/2011 - 07:54 | 1594419 speconomist
speconomist's picture

http://www.cboe.com/micro/credit/introduction.aspx

http://www.cboe.com/micro/credit/AvailableCebos.aspx (and more links with info there). They offer BAC CEBO, the question is where?

 

By the way, mentioned by ZH some time ago here http://www.zerohedge.com/article/prepare-trading-revolution-here-come-cds-retail-investors

 

Also, are you Spaniard by any chance?

Wed, 08/24/2011 - 08:15 | 1594452 hugovanderbubble
hugovanderbubble's picture

Yes im the flag of ZH in Spain.)

I wish CDS are not available for retailers....

 

Wed, 08/24/2011 - 08:18 | 1594461 Mentaliusanything
Mentaliusanything's picture

Down under we have a disrespect of anything in power. Our banks are still Banks. They are not "investment banks" (other than Macquarie Bank) all Banks in Australia are heavily controlled and vetted by the Reserve Bank. It shows when the entire banking system in Australia (excluding Macquarie) is rated in the top twenty in the whole World.

Short at your peril. however it is a race bettween Bank of America, Shitty bank and that French fucker Socity De loser to show us how it should really be done. Unicredit is a corpse as we speak.

However a small drop in the Ponzi property market in OZ would almost certainly see this post a laughing stock but we could always mark to make believe and pretend like you do

AAAA hey-------- till it aint.

I love the smell of deposits burning in the Morning

Wed, 08/24/2011 - 08:19 | 1594463 sunny
sunny's picture

European are toasted and fried

BUT, I just checked and this AM European markets are virtually all up and flying high?  Could it be they don't know they are toast?  Don't those folks read ZH?  As I read this article I wonder how many Europes there are since their indices don't match the words above.

sunny

Wed, 08/24/2011 - 07:32 | 1594382 ZeroPower
ZeroPower's picture

And BAC CDS still getting lifted..all the way up to 382/401 right now.. was actually bid higher earlier on, 400/410 about an hour ago.

Wed, 08/24/2011 - 07:37 | 1594386 hugovanderbubble
hugovanderbubble's picture

I have seller at 435/455 something bad coming...

 

TARP  II
RECAP - 18.000-24.000 MN.

 

BAC /COUNTRYWIDE REAL LOSSES INFINITE with derivative exposure.

 

Obama u have more than a problem...Wall Street too.

 

Federal Reserve has run out of ammo. No more coins...

 

GAME OVER

Wed, 08/24/2011 - 07:37 | 1594389 Irish66
Irish66's picture

Holy crap

Wed, 08/24/2011 - 08:33 | 1594496 Arrowhead
Arrowhead's picture

I just loaded my monkey and dog on the wagon and my pony is pulling us out to the country for some campin'

Wed, 08/24/2011 - 07:32 | 1594383 Dick Darlington
Dick Darlington's picture

And what does the european equity complex do? Up up and away... Free markets and all...

Heavy selling in Italy from real money investors continue and ECB intervening and acting the last one to hold the bag. Hate to be a cynic but ECB will FAIL like it did with the smaller periperals.

Wed, 08/24/2011 - 07:42 | 1594400 hugovanderbubble
hugovanderbubble's picture

Full Italian banks are in default..ALL

 

1.Banca Intesa

2.Unicredito

3.MontePaschi di Siena

4.Banco Populare

5.Banco Milano

6.ASSECURAZ GENERALI (INSURANCE)

----------------------------------

Hows possible that all ITALIAN BANKS has passed the last STRESS TEST? please tell me why this is like Irish banks in 2010....the same...

 

ALL EBA (european banking association members) should be prosecuted and in jail.

 

Wed, 08/24/2011 - 07:40 | 1594394 Dick Darlington
Dick Darlington's picture

Bbg reporting that German President Christian Wulff is questioning the legality of ECB's bond purchases. Finally someone cares to mention it aloud! Now, where's the handcuffs?

Wed, 08/24/2011 - 07:42 | 1594398 maxmad
maxmad's picture

The handkuff's are at DSK's apartment!

Wed, 08/24/2011 - 07:42 | 1594401 SwingForce
SwingForce's picture

What good are CDS if TPTB never let anyone collect on them?

Wed, 08/24/2011 - 08:20 | 1594466 Snidley Whipsnae
Snidley Whipsnae's picture

"What good are CDS if TPTB never let anyone collect on them?"

How would you like to own an insurance company that never had a pay out on losses?

Sweet deal if you can get it, eh?

Wed, 08/24/2011 - 08:34 | 1594498 ZeroPower
ZeroPower's picture

Theyre MTM daily and you collect (or pay) premiums quarterly so they are quite essential to running a proper bond and credit book. There have been plenty of corporate credit events on CDS as well.

Wed, 08/24/2011 - 07:45 | 1594402 misterc
misterc's picture

Wulff is a lame duck-figurehead, democracy-posterboy.
His job is to hold speeches at soldiers' funerals, shake hands with immigrants and get ~150k eur a year for life (even if he would resign, inflation-adjusted of course).

Wed, 08/24/2011 - 07:45 | 1594404 max2205
max2205's picture

ZEW will vee happy....

Wed, 08/24/2011 - 07:46 | 1594407 Mentaliusanything
Mentaliusanything's picture

And as you speak the POTUS is Putting. Shut the fuck up or he might get back to the real work of a President and stand on the poop deck directing the War against stupidity which he allowed.

My God who will stand with this country shoulder to shoulder and get you producing real things that lasted and were trusted around the whole World. Do you remember when you were trusted and revered . well do you. thought not.

"That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

Wed, 08/24/2011 - 07:47 | 1594408 Oh regional Indian
Oh regional Indian's picture

This is the globalization underbelly that many do not see. i said it here a little earlier.
Here in India, General Motors is doing really well. Really really well. So are VW and Daimler and BMW and Toyota and on and on. But it's all off-shore from the US/EU/Japan, profits included (of course, GM's 51% chinese partner takes home a chunk too). Likewise, big German firms, big dutch firms, big brit firms, they have all made/moved factories here, with supplier bases in even poorer countries like Sri Lanka, Bangladesh, Thailand etc....

Booming abroad, Dooming at home. And most countries have the same set-up.
All a scam.
Vivek

http://aadivaahan.wordpress.com/2011/08/24/precursor-03-bottom-falling-o...

Wed, 08/24/2011 - 07:47 | 1594409 Cdad
Cdad's picture

Planting more stories there, Tyler?  The folks over at the BlowHorn [CNBC] are not going to be happy with you.

But then again, maybe, just maybe Maria "I lost my curiosity years ago" Bartiromo will experience an instance of skepticism this afternoon.  You never know.  Once bitten by the journalism bug, I hear it is hard to go back to reading scripts written by criminal syndicate Wall Street bankers.

Wed, 08/24/2011 - 07:47 | 1594410 oobrien
oobrien's picture

WOW!

Who gives a flying fuck?

Let's tune in, turn on, and drop.

What else can we do?

Anyway, so long.

And fuck Ben Bernanke in his Princeton ass.

http://geraldcelente.proboards.com

 

Wed, 08/24/2011 - 07:52 | 1594418 JohnnieWalker
JohnnieWalker's picture

Clarke and Dawes sum up the European problem perfectly:

http://www.youtube.com/watch?v=wnOanwJhebA

 

Wed, 08/24/2011 - 08:02 | 1594438 chinaguy
chinaguy's picture

DAX up 1% doesn't seem to care, unless its' some of that QE3 hopium

Wed, 08/24/2011 - 08:29 | 1594479 snowball777
snowball777's picture

"The German IFO report was not as bad as some analysts expected, which provided appetite for risk"

Someone go tell RanSquawk to read this article...

Wed, 08/24/2011 - 08:30 | 1594484 Snidley Whipsnae
Snidley Whipsnae's picture

Bernanke note to self:

Things not to discuss at Jacks Hole...

Macroeconomics

Microeconomics

Gold as money

Why my hair implants failed...

Wed, 08/24/2011 - 09:37 | 1594682 cranky-old-geezer
cranky-old-geezer's picture

today we got a new kink after German president Wulff questioned the legality of ECB bond purchases during a conference at Lindau, claiming that bond buying damages the ECB's independence. Wulff cited an article in the European Union's fundamental treaty, which prohibits the ECB from buying bonds directly from governments. "This ban only makes sense if those responsible don't circumvent it with comprehensive purchases on the secondary market," he added. "What independence?" might add anyone who has seen the global printing cartel in action over the past 3 years. Yet the recent expansion in the SMP, which has bought about €40 billion in Spanish and Italian bonds, is the only thing keeping Europe afloat now: if this were taken away, it is the beginning of the end.

This is a carbon copy of what's happening here in America:  

a) Fed charter prohibits buying Treasury debt ...directly from the Treasury ...but not indirectly from "primary dealers".

b) Fed buying Treasury debt is the only thing keeping the federal government going now.  If Fed stops buying it, it's the beginning of the end.

Central bank buying government debt (when nobody else will) is the kiss of death for any national government  The end is near. And it's currency collapse.  Collapse of confidence in the currency.

The Euro is about to see currency collapse.  The US dollar is about to see currency collapse.

There's no way to stop it.  Central banks can't control people's confidence in the currency.  

This is why Bernanke is scared shitless about QE3.  He knows it may collapse the US dollar.   But there's no choice.  He has to keep buying Treasury debt or the federal government collapses.

He's sacrificing the stock market now, trying to move people into Treasuries.  But it's only temporary relief.  The only way to absorb $150 billion of new Treasury debt each month with interest rates at zero is Fed buying most of it.

At that can't go on very long. Maybe a few years.  When Fed's balance sheet gets up around $10 trillion, that's when confidence in the US dollar collapses worldwide.

But it may happen way sooner.  Maybe when Fed's balance sheet hits $5 trillion, or $4 trillion.

It's impossible to say exactly when.

Meanwhile look for more off-balance-sheet games and shennanigans like currency swaps and such, trying to hide the true extent of the problem, trying to keep the ponzi going a while longer.

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