European 'Bail-In' Risk Rises To Near-Six-Month Highs

Tyler Durden's picture

The difference between senior credit risk and subordinated credit risk for Italian and Spanish banks has risen dramatically in the last few days (since we posted the macro 'bail-in' trade) with Spanish banks the hardest hit but all wider. Senior credit for these banks remains in its relatively wide range of the last few weeks but the subordinated credit risk has broken out to the upside (an average over 950bps across the eight names in our index) as the market prices in the endgame of any dilutive 'burden-sharing' endgame as a cram-up of sub (and perhaps even some senior) bank credit. Perhaps spooked a little by comments from de Guindos on 'preferreds' today, it is the Spanish Cajas that are worst with Caja de Ahorros del Mediterraneo +185bps at 1455bps (equivalent) today. In the meantime, the LTRO Stigma (the spread between LTRO-encumbered and non-LTRO banks) has pushed back over 180bps to record wides as the LTRO-driven symbiotic contagion unintended consequence of banking and sovereign stress reinforce one another more and more.

Senior-Sub bank spreads are decompressing rapidly (lower pane)...

and LTRO-Stigma is back at record wides...


Chart: Bloomberg

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mrktwtch2's picture

no matter what stocks bounce today..we have been down 5 out of the last 6 days..

bigwavedave's picture

Looks Bullish to me. Nice

Sudden Debt's picture


quote of the millenium...


disabledvet's picture

Because water is so incredibly dense it is surprisingly buoyant as well. Hence "a ship never sinks" per se. "She breaks up...then drowns and/or floats." it is an axiom "there is always a combination thereof."

localpacific's picture

This will obviously effect EUR/USD going forward... any euro bail will do that... Short Term Technical Analysis 

LawsofPhysics's picture

Now if only technicals mattered.  A complete audit of the Federal reserve, and exactly where and to whom all that interest was going would be far more insightful.

LawsofPhysics's picture

Bail-in?!?!?  As in, sink the boat faster? I am confused.

TrainWreck1's picture

Remember that commercial for the Clapper?

Bail-out (clap,clap) Bail-in (clap,clap) Bail-out, Bail-in, the Bailer

RobotTrader's picture

All it is going to take is for Angie Merkel to request a complete "Hollywood Makeover" with a renowned Beverly Hills surgeon in exchange for her approval of the "Choco-Bonds".

Once she agrees to that, we'll see a 425 point up day easily.

RobotTrader's picture

Again, ask 100 people on the street what "LTRO-Stigma" means.


Answer?  Zero.

But ask them how many Twitter followers Justin Beber has, or how much weight Khloe Kardashian has lost, they will know exactly.


Alejandrito's picture

there are economists like Krugman who have won a Nobel Prize without knowing any of those things, I mean what is  LTRO?

disabledvet's picture

Hence "why we put beautiful women on television." the alternative is the truth.

Alejandrito's picture

Spain, Italy, why anyone talk about France

old naughty's picture

because Sarko sings (Jack Johnson) to Merkel: "Well, it's always better when we're together".