So much for the half life of the latest European recovery rally. After the ECB is rumored to have bought €1.7 billion in Italian (70%), Spanish and Portuguese bonds this morning, spreads across the continent stabilized... however briefly. Since then, confirmed speculation of an Austrian downgrade and an unconfirmed rumor that Egan Jones and/or other rating agencies will put France on downgrade review has just sent the French(OAT)-Bund spread to new record highs. And so, the ECB just used up even more firepower to achieve absolutely nothing, especially since the market will now expect Draghi to buy double or €3.4 billion tomorrow, or else it will get very, very angry. In the meantime, we urge the ECB to promptly buy all French bonds it can. Wait, what's that, the ECB can't buy French bonds (yet)? Oh... Oops.
And in other news, here is the EFSF since the European "bailout" summit. You know, the same EFSF which will buy trillions of old school European cash rolling debt.Hah.