The Eye Of The Eurocane Is Passing: Risk Back Off

Tyler Durden's picture

It was fun while the Liesman rumormill lasted:

  • Italy CDS +12 bps to 460
  • Spain CDS + 8 bps to 375
  • Portugal CDS + 10 bps to 1,110
  • Ireland CDS + 18 bps to 736
  • Greece CDS: Many points upfront but running joke

The Euribor-OIS spread also enjoyed the three day respite and is now back in widening mode, up to 81, after three days of declines, and on its way back to the 2.5 year high of 89 bps from 5 days ago.

Elsewhere, Germany just sold E5 billion in 5 year bonds at the lowest Bid to Cover since the inception for of the euro, meaning interest in German paper is evaporating fast. From Reuters:

German government bond futures reversed gains
on Wednesday after a sale of 5-year paper failed to draw enough bids to
cover the amount on offer.


Bids at the auction totalled 5.115 billion euros, with 6 billion euros of paper on offer .


December Bund futures <FGBLz1> were last 1 tick lower at 135.87, compared with around 135.99 just before the sale

And from Market News:

The German federal government sold E5.0 billion
in new 1.25%-coupon Series 161 five-year Bundesobligationen (Bobls) at
an average yield of 1.22%, the Bundesbank announced Wednesday.


The bid-cover ratio, excluding retention, was 1.0, down from the
1.1 b/c at the previous Bobl auction in late June.


There were a total of E5.115 billion in bids for the auction,
including E2.435 billion in competitive bids and E2.68 billion in
non-competitive bids. The German government accepted 100% of the
non-competitive bids.


The lowest accepted price at the auction was 100.08, and the
average weighted price was 100.15. The Bundesbank accepted 100% of bids
at the minimum price.


At Wednesday's auction, the government retained E1.0 billion of the
issue for its open market operations, bringing the total tranche volume
to E6.0 billion, as previously announced. The sale will settle on
Friday, September 30. The S.161 5-year notes will mature on October 14,

And last but not least in cash land, Italian 10 year yieds rose to 5.63% while the 2 Years are 7 bps wider to 4.32%.

And adding insult to injury is PIMCO which told the Telegraph that UK GDP in the 2012-2015 will average 2.00%, not the 2.75% forecast, which will push governent unemployment higher.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Racer's picture

But but but... the futures are soaring?

eigenvalue's picture

Because the Bundestag will pass the EFSF package this week for sure.

wang's picture

Tom Keene just opened the show "the celebrations continue" as he recited the futures

his first question to his first guest  "what do the gloomsters get wrong?"


LongSoupLine's picture

Exactly!, Bob Pisani said this rally is 75% real fundamentals, which is why I took 75% of my total wealth and went all-in on Netflix, GE and HP.

In other great news, I'm highest bidder on a bridge some guy's, you all are missing out...suckers!

covert's picture

the future will be turbulant, exciting and progressive no matter how much the nihlist don't like it.


GeneMarchbanks's picture

Fire up the rumor mill she's losing steam!

pendragon's picture

somebody forgot to tell the eurusd buyers...

jmcadg's picture

Someone forgot to tell the Credit Agricole buyers. 

AngryGerman's picture

Trichet in the interview with Corriere della Sera:

4. European countries were urged to boost the rescue fund (EFSF) to contain contagion and avoid recession. What do you think of that? Could the EFSF be leveraged, for example, through the European Central Bank, or receive a bank licence? Or is it better to anticipate the creation of the ESM, as Germans suggest?

I call for the full and swift implementation of the decisions of 21 July taken by the 17 Heads of State or Government. And for them to stand ready to face up to acute new challenges in a period which is so demanding.


i.e. leveraged EFSF

yabs's picture

so why the stocks are up?

nmewn's picture

So they can be faded to zero into the close.

Ethics Gradient's picture

Ask Robot.

Don't ask him about bonds though. He hasn't a clue. Not in his programming.

Tic tock's picture

Well, if people aren't going to buy the Bonds and the ECB will not... what are you going to do?

Tic tock's picture

fuck only knows

Tic tock's picture

..and also, Tyler, kindly redefine your notion of Risk-off

Broomer's picture

I was going to complain that the order should be Portugal, Italy etc.

But IS PIG is so much better.

WoodMizer's picture

Sunk cost dilemma.

I plan to leave for a three week european vacation on Oct. 20;

airfare and accomodations have already been paid for.

This is a classic economic dilemma, but the risk of being stranded by Spanish labor disputes causes concern.

Any suggestions? 

Broomer's picture

Buy gold and silver.

And some books to read at home.


My English is not good, I read your post again and I'm assuming that "sunk cost" means you already paid for it.

If you can change destination, do so. Here in Brazil the post office and the bank tellers are on strike.

Now in my state the police is also going on strike. Just imagine something like that happening, or the shit hitting the fan while you are there.

WoodMizer's picture

I would change my plans but, I am going to visit my sister and 2 young nephews.

As for sunk cost:

-Airfare is non refundable and paid for

-hotel accomodations are also paid in full (by my sister)

-Food is already covered for 2 of the 3 weeks

-no car rental costs

- I am planning on spending less than 700 euro during the trip

AngryGerman's picture

so what's your problem? when the flight is delayed due to a strike, check your airline's terms to see in how far you are fucked... normally you have no right for another flight, but often airlines will still take you on a later plane.


and if you are stranded, get yourself some spanish chica and live the rest of your life off paella and roja

Broomer's picture

Take with you some extra cash to be able to get out by taxi/cab/boat/mule/whatever.

At the smallest sign of trouble get out as fast as you can. Gasoline has this tendency of disappearing when crisis hits.

Herman Strandschnecke's picture

I would make enquiries for the ferry from Santanda in Spain to Plymouth England in case you need to get to anglo american territory quick.

ZH's in UK will look after you I'm sure. P.S: 700 zeuros ain't much at Spain's prices. Best wishes to your family and bon voyage, eh.

AngryGerman's picture

you can come, but bring some spare change if you have to prolongue due to strikes

ping's picture

You're definitely covered for subsistence and a flight back to the USA; and possibly for compensation, depending upon the circumstances.

Relevant EU law:

The Air Transport Users Council says: 'Regulation (EC) 261/2004 requires airlines to offer you meals, refreshments and hotel accommodation as appropriate whilst you wait for a rearranged flight. They should also cover any transport costs between the hotel and the airport. There are no time or monetary limits on the provision of this assistance.

Under EU rules, airlines must compensate passengers up to €600 if their flight is cancelled or heavily delayed, unless the situation has been caused by 'extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken.'

The ruling that outlines these rights is Regulation (EC) 261/2004 and it applies to all flights wholly within the EU/EEA or Swiss region, or departing an EU/EEA or Swiss airport, or arriving in the region and run by an EU/EEA or Swiss airline.

'If your airline has not provided assistance, and you have had to arrange it yourself, our advice is to keep your expenditure to a minimum, make sure you get receipts and claim reimbursement from your airline when you get home.'

Phone your airline to check, but do read the act too.

Have a good time!

WoodMizer's picture


Should I bring bullion or bitcoin, in case TSHTF well before my scheduled flight home?

AngryGerman's picture

fund managers need to get back into equities. they have to take the rally (if it comes) from the beginning to get their tracking errors back in line. remember that most have defined mandates. and those who have freedom are desperate for any upside, as quarter-end reporting will reveal the bloodbath to many investors.

so depseration, coupled with optimism = equities up

sabra1's picture

i was wondering why the US futures took off!

papaswamp's picture

Bad is the new good...

Die Weiße Rose's picture

Europe: everything is fixed now, start buying the dip !

US and rest of World: everything is fixed now, start buying the dip !

China: sorry about the hot potatoes ....

Crunch's picture


Outstanding detailed interview with greek economics professor at Athens University on Dutch tv news show. 

Conclusion: "You are watching a farce, Europe about to implode."

Interview in english, program is 40 minutes, interview starts at minute 19.

Watch here:


Schmuck Raker's picture

Thanks Crunch.

Worth a listen everyone, interview itself is only 5-10 min.

"Greece is just a sideshow now..."

Mr_Wonderful's picture

The level of major resistance, the 50-day moving average, is falling quite rapidly. It was at 1230 when the last rally stalled at 1220. Now it´s at 1207 and the bull ran out of steam yesterday at 1195.

It´s an impressive run but still I think it lacks underlying strength. The internals aren´t really that impressive. Maybe they´ll be able to push it above 1200 but I´m sceptical. Still, the quarter end window dressing factor is probably strong. We shall see.

The Axe's picture

BUT...EURO President out flapping his gums today....Its not a "iceberg" its not a "iceberg"  stay in your seats, do not be afraid...please

AngryGerman's picture

it's not an iceberg, it's the whole arctis!

entendance's picture

BREAKING: Greece Departure From Euro Zone Inevitable, Issing Tells Stern

The Axe's picture

This rally should last as long as it takes to read his "transaction tax" proposal.....that won't make any Big Swinging  Dick happy!!!!  

rokka's picture

Time to blow the bonds bubble.

Robslob's picture



They will try and rally all the way through to that Banking Holiday known as Columbus Day (October 12th) when the 5 Central Banks begin their dollar infusions into Europe.

youngman's picture

Its wierd that Germany has no buyers of its bonds.....the strongest of the EU countires I have been told...but Spain and Italy had no problem selling yesterday.....what is up with that????one day makes that much different....or something much more sinister....Snidley Whiplash maybe

AngryGerman's picture

bc the ecb is not (yet) buying bunds

msmith's picture
Could Apple be topping out with downside movement ahead?  Bearish price action the last couple of days could be suggesting just that.  It could likely be a large correction.  Most people can not fathom the reality that Apple could drop in price, but it can and is it overhyped for the state of the economy?
Mr_Wonderful's picture

AAPL has been a winner in this lousy quarter so they´re selling that to dress up their losers.

It´s a great company with a strong brand, making tons of money.

Unlike major stock watering scams like MSFT, INTC, CSCO and GE to name a few, AAPL has relatively few shares outstanding. I think it´s a buy on dips from here.

TheArmageddonTrader's picture

Here's what I think is going on with this Greek bailout renegotiation talk. In a nutshell, Merkel is finally admitting privately that the numbers don't add up and has been secretly working on a plan to let Greece default while staying involved as creditors to Greece to try and keep it in the Euro. Won't work as planned but at least it gets the default rolling sooner.

disabledvet's picture

markets rally due to "Euro: Das Boot edition."
looks like the torpedo's are locked and loaded!