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Europe's EFSF 'Firewall' Risk At 3 Month Highs, Accelerating At Fastest Rate In 6 Months

Tyler Durden's picture


The last two weeks have seen the market's perception of the risk of Europe's 'firewall' rise at its fastest rate in six months (the peak of the crisis). At 142bps wider than Bunds, EFSF bonds now trade at their widest in three months and look set to break out to peak-crisis levels. We are sure the Japanese will still back-up-the-truck at the next issuance of self-referential ponzi bonds, but not only is the credit risk of this staggering CDO rising fast, as Bloomberg notes, the market's anticipation of the PPCs (Partial Protection Certificates), that - akin to CDS - provide an uncollateralized protection for 'some' of the potential losses investors may face in buying sovereign debt at issuance, is dreary at best and "not something that appears immediately hugely attractive". CDS already trade on these bonds and the only willing players taking advantage of that market in size are the basis traders currently; as real money "will buy peripheral bonds outright, because they’re attractive enough, or they won’t buy them at all, and financial engineering [is not] necessarily going to change that dynamic.” Just as we have again and again pointed out, the reality is that investors have seen through these self-guaranteed and 'irrelevantly convoluted' attempts to kick the can and Draghi's rejection of the IMF-Geithner calls for more crisis-fighting (as noted by Bloomberg this evening) - arguing that they have done enough by cutting rates and issuing bank loans, perhaps reflects a Europe that knows it is on the brink. This was further reinforced by the Bundesbank's Joachim Nagel, who, in a moment of sublime reality-awareness, ruled out any direct EFSF 'help' to the banks "as that would pass on the risk of a bank bailout to all European taxpayers" - but why does Geithner care so much - we thought US banks were 'safe' and unexposed to Europe (eh Jamie?).

EFSF Bond Spread to Bunds - widest in 3 months and fast two-week rise in six months...

And as if one needed reminding, European GDP-weighted sovereign risk is back at 3 month highs...

and one last reminder of just what US credit traders think of US financials relative to US equity traders (even as the Europeans remain in agreement on the uncertainty)...


Charts: Bloomberg


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Sun, 04/22/2012 - 22:19 | Link to Comment FinalCollapse
FinalCollapse's picture
..rules out any direct EFSF 'help' to the banks " They will find third party to transfer the money to the banks. It will not be a direct transfer. Germans always say 'nein, nein...' but at the end of the day they roll over and put up.
Sun, 04/22/2012 - 22:49 | Link to Comment El Oregonian
El Oregonian's picture

Did the Germans say "Nein nein" or "Mine Mine"?

Mon, 04/23/2012 - 02:28 | Link to Comment Andrew G
Mon, 04/23/2012 - 02:48 | Link to Comment dognamedabu
dognamedabu's picture

That's the shell game. No more direct EFSF 'help' to the banks but IMF funds funded by taxpayers from all over the world is perfectly acceptable. If we take it out of their pocket after they take it out of yours then see our hands are clean!

Sun, 04/22/2012 - 22:18 | Link to Comment Cursive
Cursive's picture

How ballsy are these perps?  I mean, they're juggling 16 chainsaws non-stop with one hand.  I just wish the popcorn didn't get stuck in my teeth....

Sun, 04/22/2012 - 23:18 | Link to Comment CURWAR2012
CURWAR2012's picture

Your just made me spit out my cashews in laughter!

Sun, 04/22/2012 - 22:20 | Link to Comment navy62802
navy62802's picture

Everything's fine. Europe's fixed, right??

Sun, 04/22/2012 - 22:21 | Link to Comment junkyardjack
junkyardjack's picture

If I turn the charts upside down this is bullish, no?

Sun, 04/22/2012 - 22:34 | Link to Comment NuckingFuts
NuckingFuts's picture

I don't know shit about economics the way many ZH'ers do but..... Is Fire Wall a term that even means anything anymore? Blast Wall? Nuke Wall? I don't know.... It seams the vocabulary needs to meet the reality.

It seems the whole world has a big ass fire on their hands.

Mon, 04/23/2012 - 00:55 | Link to Comment delacroix
delacroix's picture

a firewall in finance, is like a levy in new orleans.  it only works when not needed, kinda like a cds in greece.

Mon, 04/23/2012 - 03:10 | Link to Comment dognamedabu
dognamedabu's picture

 If we don't keep pace with the drivers, Dat cause heap of trouble cause whippin's a given and hard ones, too - Master might whip us real good for cumin' in too soon an unhitchen the horses.

Sun, 04/22/2012 - 22:29 | Link to Comment chump666
chump666's picture


You gotta laugh.  Now Holland AAA about to get wiped.


Sun, 04/22/2012 - 22:47 | Link to Comment Tom Green Swedish
Tom Green Swedish's picture

I've got an idea.  The Fed will print more money and give it to Europe. The zombie people are all stupid anyways they'll never figure it out. 

Sun, 04/22/2012 - 23:05 | Link to Comment johnnysize
johnnysize's picture

Who Cares? Keep shorting Spanish 10's till your grandkids speak German! Who the fuk cares? Nothing is going to happen... 0.00.  Until the German people are RIOTING in the street get and be LONG everything including  sov debt, global equities, and sell all the sov CDS you can possibly choke on. ITS A SCAM! HE WORLD ISNT FALLING APART! HE SAME BANKS HAT ARE SWAPING SOV AND SHORTING ANTHER WILL BUY THE NEXT. We should worry about market structure... equity sreads and capital markets, credit default as a hedge against failure not a leveraged death spiral, and getting rid of the attitude that we can trade and get out within zillllllaseconds if we are not right. Please make The Casino a valid business again!

Sun, 04/22/2012 - 23:13 | Link to Comment Mugatu
Mugatu's picture

This whole EFSF charade reminds me of a saying I read on a wall (I was a drunk UNC undergrad at the time): 

"A wink is as good as a nod to a blind horse"


Guess who the horse is in this instance?

Mon, 04/23/2012 - 00:24 | Link to Comment ekm
ekm's picture

David Marsh is one of few that I read on MSM. This guy connects a lot with past european economic events and is quite funny.

Recommended read. Very informative.

I'm copy/pasting only point 1 out 10 points:

1. Let history be your guide. Two months after the French presidential elections in June 1969 that brought Georges Pompidou to power, France devalued the franc. In March 1976 a regional election reverse for President Giscard d’Estaing’s party prompted the franc’s departure from the Snake (the forerunner of the European Monetary System, EMS). In March 1978 an unexpected victory for Raymond Barre in the parliamentary elections catalyzed Chancellor Schmidt and Giscard to press ahead with the EMS. François Mitterrand’s May 1981 victory ushered in turbulence and three franc devaluations in the next 22 months. Victory for the right in the March 1986 parliamentary elections brought a franc devaluation one month afterwards.

Mon, 04/23/2012 - 05:17 | Link to Comment disabledvet
disabledvet's picture

ditto Mexico i might add.

Mon, 04/23/2012 - 00:44 | Link to Comment q99x2
q99x2's picture

'the Bundesbank's Joachim Nagel, [...] ruled out any direct EFSF 'help' to the banks "as that would pass on the risk of a bank bailout to all European taxpayers"'

Is this one of the elite banksters that is determining the future of humankind? If so I'm renouncing my species.

Mon, 04/23/2012 - 01:08 | Link to Comment chump666
chump666's picture

Getting cold in hell

* Collapsed Dutch budget talks could create power vacuum as downgrade looms,   early election likely -DowJones, IFR.

Mon, 04/23/2012 - 04:16 | Link to Comment DutchR
DutchR's picture

Sorry, we have no time to vote till early 2013 due to some playfull events like, Queensday, Tour de France, European Football Championship, London Olympic's, Maya Calender Countdown.....



Mon, 04/23/2012 - 05:20 | Link to Comment disabledvet
disabledvet's picture

Tim Geithner can say "do this" because he's a Treasury Secretary not the President of a Bank. "Politically speaking" it looks bad...but he's not ginning for votes here. He's pursuing American national interest...which is btw "keeping the euro intact and the euro zone borders open."

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