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Italy-Bund Spread Passes 450 bps

Tyler Durden's picture




 

While we have commented on the technical minutia of the LCH's margining rules and their blended AA benchmark, 450bps over Bunds remains a clear line in the sand in the market's mind. With Italy ever so graciously accepting (and if we believe the headlines - requesting!!) IMF's observation/supervision, it seems real money continues to leave the country's bonds in droves. With 10Y BTP yields breaking 6.3% today, the spread over Bunds just passed 450bps once again - will Draghi step up to the plate?

Chart: Bloomberg

 

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Fri, 11/04/2011 - 09:09 | 1844690 Peter K
Peter K's picture

It's just a liquidity problem compounded by a confidence issue due to those nasty speculators. Other than that, nothing to see here either....:)

Fri, 11/04/2011 - 09:10 | 1844696 Careless Whisper
Careless Whisper's picture

The Careless Whisper Morning Wake-Up Call

 

 

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Fri, 11/04/2011 - 09:16 | 1844724 SheepDog-One
SheepDog-One's picture

LOL, gotta love South Park, the most cutting edge societal commentary out there.

Fri, 11/04/2011 - 09:22 | 1844752 SGS
SGS's picture

Got Spaghetti?

Fri, 11/04/2011 - 09:18 | 1844729 rosex229
rosex229's picture

this should be the only issue that cnbc, cnn, the guardian, the telegrapg, wsj, etc are talking about at this moment, but as usual zerohedge is well ahead of the curve.

there is no agreement on an spiv or even an increase in imf funds; so much for 1 trillion in efsf funds.

back to reality

and how is the dow not at or below 10600 where it was a month ago when there was the prospect for some kind of legitimate can kicking action. now theres nothing... and were over 12000.

Fri, 11/04/2011 - 09:21 | 1844751 Stax Edwards
Stax Edwards's picture

2.5% GDP print

Fri, 11/04/2011 - 09:21 | 1844746 slaughterer
slaughterer's picture

Now that sov CDSs got "de-flowered," the vigilantes have only the Bund spreads and the raw bases to fuck.   

Fri, 11/04/2011 - 09:27 | 1844762 LawsofPhysics
LawsofPhysics's picture

Doesn't matter, all paper is going to zero and no one is going to pay out anything.  At some point some one needs to let those vigilantes know that they might want to try and fuck a real women.  

Fri, 11/04/2011 - 09:31 | 1844791 rosex229
rosex229's picture

theres 2 reasons why all paper isn't going to zero.

 

1st all currencies are priced relative to eachother. all currencies are being devalued, except the remnimbi, but people will continue to flock between them for some time. this is why the euro and dollar are still within a several year trading band, but gold is regularily setting new record highs.

2nd its not possible for everyone on earth to own silver and gold and use it for exchange, nor is a barter system possible in a modern economy with such a variety of goods and services. thus, there will at some point be a return to a gold standard, but you'll still be trading paper. 

that being said gold will outperform all other assets classes for some time to come

Fri, 11/04/2011 - 09:25 | 1844768 qussl3
qussl3's picture

Maybe the suckers realized there's only one exit and the theatre was beginning to smell funny?

Fri, 11/04/2011 - 09:30 | 1844785 Mugatu
Mugatu's picture

Bartender!  Better make that bailout a double!

Fri, 11/04/2011 - 09:39 | 1844832 jdelano
jdelano's picture

The Bailout:

2 Parts Goldschlager

1 Part Cyanide

Served as a suppository.  

Fri, 11/04/2011 - 10:34 | 1845092 tmosley
tmosley's picture

Strain out the gold and add a few torn up 100 trillion Zimbabwe dollar bills.

Fri, 11/04/2011 - 09:09 | 1844691 YesWeKahn
YesWeKahn's picture

Can he spend european money to save his own country?

Fri, 11/04/2011 - 09:09 | 1844692 traderjoe
traderjoe's picture

Gold is money.

Fri, 11/04/2011 - 09:14 | 1844716 GeneMarchbanks
GeneMarchbanks's picture

It only just occurred to you?

Fri, 11/04/2011 - 09:17 | 1844727 Sudden Debt
Sudden Debt's picture

Maybe he wanted to say: GOLD IS CURRENCY, and you can still buy it with "money"

Fri, 11/04/2011 - 09:26 | 1844769 disabledvet
disabledvet's picture

followed up with a slight pause, a deep breath and a thoughtful forefinger to the chin..."even with our money" comment even though no one even asked that question.

Fri, 11/04/2011 - 09:14 | 1844717 qussl3
qussl3's picture

Gold is wealth.

Damn impractical as currency for now.

Fri, 11/04/2011 - 10:37 | 1845103 tmosley
tmosley's picture

No, gold is a CLAIM on wealth.  Claims on wealth are never impractical currency, so long as the issuer has not defaulted (hard for all of humanity to default at once--only reasonable way is for everyone to die, rendering money worthless).

Fri, 11/04/2011 - 09:15 | 1844721 Dr. Engali
Dr. Engali's picture

No it's not. Ben said so,and I believe in everything Ben says because he promised to throw money out of helicopters to me some day.

Oh yeah the great pumpkin forgot to leave me any candy this year. Must have been an oversight.

Fri, 11/04/2011 - 09:10 | 1844695 Matt1973
Matt1973's picture

Bullish

Fri, 11/04/2011 - 09:11 | 1844697 GeneMarchbanks
GeneMarchbanks's picture

Draghi will step up of course, after all, it's his team. The Squid is hungry.

Fri, 11/04/2011 - 09:11 | 1844698 BlueStreet
BlueStreet's picture

And now back to our main story, the weather in Athens today should be mostly cloudy with a high of 80 degrees.  

Fri, 11/04/2011 - 09:22 | 1844706 Dr. Engali
Dr. Engali's picture

Nice gap fill yesterday on the DAX chart.

Fri, 11/04/2011 - 09:13 | 1844708 larry david
larry david's picture

Slightly OT (not really since everyone here, me included, loves PMs), but I've been wondering.

Let's say gold and silver take off, margins hikes no longer work, so the gov't decides to "outlaw" PMs or puts a 50%+ tax on all gold/silver sales.  What would happen in that case?  Would local coin dealers close up shop?  Would gold and silver become extremely scarce? 

The one thing I hate about owning physical PMs is that the gov't still has too much say in the price, and if 90%+ of people who are invested in the status quo (obviously includes politicians, but also ppl collecting benefits and most random idiots) adopt the next fiat currency after the USD fails, gold and silver still won't reflect their "true" value.  Who knows how long this game can continue, it may last another 40, 50, 75, 100 years (not the USD per se, but the fiat system itself.)  Thoughts? 

Fri, 11/04/2011 - 09:18 | 1844733 qussl3
qussl3's picture

Unless 90% of the population own physical PMs in a form that can be easily spent as currency, PMs will not recirculate.

Instead the 90% will make sure those with PMs have their wealth socialized.

What you want is stable but high inflation, with fiat still circulating.

Too much risk in hyperinflation scenarios, social breakdown sucks for everyone.

Fri, 11/04/2011 - 09:32 | 1844795 larry david
larry david's picture

And that's the reason I hate the gov't and their bullshit fiat system.  Part of the value in PMs is that they make great money, a great medium of exchange, are highly divisible, recognizable, store of value, etc.  If everyone is just holding their gold, it might be worth a lot, but you also might risk a lot by trying to cash it in, which you may need to do to convert it to fiat and pay a bill/buy food or something if things get really bad.  If the local grocer doesn't take silver/gold, it certainly doesn't make PMs worthless, but it does make them worth less. 

Think about marijuana.  It will always have some value, but there is also a risk every time you buy/sell (grow) it of government intervention and possible fines/jail time.  Do we really want gold/silver becoming the next pot?  Maybe, maybe not.  I'd rather just have it trade freely and see who will accept my gold and who won't. 

Fri, 11/04/2011 - 09:32 | 1844799 tmosley
tmosley's picture

Socialize that which is already socialized--the central bank reserves.

Fri, 11/04/2011 - 09:42 | 1844841 johny2
johny2's picture

We are probably heading either for a nasty but short war, or a new world order with a new currency backed by real things. In first case gold will not help you much, in other it may help a lot as long as you get to keep it. 

Fri, 11/04/2011 - 09:19 | 1844736 sabra1
sabra1's picture

sell all your gold and buy canadian real estate, it only goes up!

Fri, 11/04/2011 - 09:23 | 1844758 Terminus C
Terminus C's picture

FTW bitchez!

Especially in Vancouver, Toronto and Calgary, those places can never go down... never... and I really really mean never...

I mean who doesn't want to pay two million for a hundred year old condemned house?

Fri, 11/04/2011 - 09:19 | 1844739 HardlyZero
HardlyZero's picture

+1

But I'm still 100% into PMs.

Its the 401K I worry most about...I'd take the extra 10% tax when/if necessary to go physical/storage.

Fri, 11/04/2011 - 12:21 | 1845481 unununium
unununium's picture

Um.... by the time that is obvious, it will be far too late.

Fri, 11/04/2011 - 09:24 | 1844757 Melin
Melin's picture

we barter until we restore our constitutional republic?

Fri, 11/04/2011 - 09:26 | 1844775 AbelCatalyst
AbelCatalyst's picture

You could make that same argument for just about anything. The Government can do whatever it deems necessary for its own preservation until it can't. That's why complex societies ALWAYS collapse.

Must read book: The Collapse of Complex Societies by Joseph Tainter

Fri, 11/04/2011 - 09:30 | 1844784 disabledvet
disabledvet's picture

i'm not sure creating a black market in silver and gold is a good idea. would it include jewelry? how about flatware? it definitely would be "causii bellum" for Europe if it were to happen there. and just as obviously the price would soar...as well as the value. it is one way of creating a gold standard of course...unofficial...of course.

Fri, 11/04/2011 - 09:15 | 1844719 monopoly
monopoly's picture

What a freaking circus this all is. And people still think we have honest markets.

Fri, 11/04/2011 - 09:15 | 1844723 sabra1
sabra1's picture

Ouch; Fake Toilet Paper, Made In China:

the sequel: fingers run through it!

Fri, 11/04/2011 - 09:20 | 1844734 Sudden Debt
Sudden Debt's picture

Oh well, you might as well enjoy the feeling. Just don't smell you finger or poke your nose with it...

Fri, 11/04/2011 - 09:21 | 1844749 qussl3
qussl3's picture

At least they use paper.

In some parts of south east asia, you dont shake, eat or serve food with your left.

Fri, 11/04/2011 - 09:21 | 1844747 srsly-wtf
srsly-wtf's picture

No...A River Runs Through It...

Fri, 11/04/2011 - 09:17 | 1844728 slaughterer
slaughterer's picture

But, but, but ...

Fri, 11/04/2011 - 09:19 | 1844740 SheepDog-One
SheepDog-One's picture

This doesnt tell me whether its going to be a +2% equities day or a -2% day...its all that really matters after all.

Fri, 11/04/2011 - 09:20 | 1844743 nathan1234
nathan1234's picture

Crooks control the Govt's

Crooks are the bankers.

Take your money out of the banks while you can.

Yes Gold n Silver will have value because they are always welcome in Asia, anytime. Value cannot go away.

 

 

Fri, 11/04/2011 - 09:20 | 1844744 Terminus C
Terminus C's picture

Umm, not to rain on the parade but... from the chart the spread has been over 450 bp three times this month.

Why is this time more significant than the last two?  Or is this third time demonstrating that there is no going back and there needs to be a downgrade?

So many cluster fucks, so few logical market actions...

Fri, 11/04/2011 - 09:23 | 1844760 qussl3
qussl3's picture

We are in the stocks are the safe haven meme now, didnt you get the memo?

Wonder when the media shifts back to USTs or else.

Hmmmmm, how much in USTs to be sold when?

Fri, 11/04/2011 - 09:28 | 1844778 drivenZ
drivenZ's picture

it's significant because yields are once again hitting the threshold where the ECB would have to step in...Judging by Draghi's conference yesterday he basically said buying bonds is a waste of time and won't solve anything, which is very true. BUt if things get out of hand quickly they won't have a choice. you can't(not at this point anyways) enact structural reforms in Italy in a few days, so the ECB will as ZH says have to step up to the plate. will they? watch the yield.

 

http://www.bloomberg.com/quote/GBTPGR10:IND

Fri, 11/04/2011 - 09:34 | 1844804 AbelCatalyst
AbelCatalyst's picture

I believe Tyler was predicting the next intervention... There seems to be a pattern with 450 as a ceiling.... The ECB will eventually learn you can't fight Mother Nature indefinitely... One of these days it'll bust through the ceiling and all hell will break loose...

Fri, 11/04/2011 - 09:43 | 1844827 Note to self
Note to self's picture

Margin calls were supposed to be triggered if it CLOSED above 450bps.  But now the benchmark has been changed.

 

Fri, 11/04/2011 - 09:21 | 1844748 drivenZ
drivenZ's picture

just noticed this too...been checking the 10Yr yield here and there and seems like it's jumping this morning. Banks have to raise capital somehow right? ha   

http://www.bloomberg.com/quote/GBTPGR10:IND

Fri, 11/04/2011 - 09:26 | 1844772 LawsofPhysics
LawsofPhysics's picture

Yep, that is going to cause some problems.  I am sure TPTB will beat the yield back down with some back-door bullshit printing or mark to fantasy accounting.

Fri, 11/04/2011 - 09:22 | 1844753 slaughterer
slaughterer's picture

Fuck it, I am waiting for 500bp before I call disaster. 

Fri, 11/04/2011 - 09:25 | 1844767 Terminus C
Terminus C's picture

666 for me.  If it is not the number of the beast it is not a disaster.

http://www.youtube.com/watch?v=7-iRf9AWoyE

 

Fri, 11/04/2011 - 09:26 | 1844765 virgilcaine
virgilcaine's picture

Wait until Draghi and his Qtr point rate cut kick in.. just wait.  Like a BB  fired from a cannon.

Fri, 11/04/2011 - 09:42 | 1844848 jdelano
jdelano's picture

debunked by TD already.  

Fri, 11/04/2011 - 09:42 | 1844847 disabledvet
disabledvet's picture

Well Mr. Draghi did predict a "mild recession"...we'll see just how "mild" it is. Awful cranky "center" all of a sudden. "Temper, temper mon capitain" as Q would say.

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