Italy Cancels August Bond Auction

Tyler Durden's picture

Citing the most hilarious explanation we have ever heard for not daring to approach the capital markets, Dow Jones reports that following a comparable announcement from Austria earlier, none other than clutch euro Domino Italy, whose bond yields surged by about 40 bps today, has decided to take a sabbatical from accessing capital markets, and will not issue medium and long-term bonds in August. Of course, the real reason is that the spreads are prohibitively high but that's a story for another reason. The problem for Italy, however, is that it will end up burning through a lot of cash over the next 45 days and then far more will depend on the successful passage of the country's auctions in the following month, when the next scheduled medium term auction is on September 13 (full auction schedule is here). Amusingly, while all of Europe complains that the Greece, Ireland and Portugal have no capital markets access, some of the better of PIIGS make the voluntary decision to avoid price discovery. We fail to see how this can possibly result in anything than another loss of credibility in the eurozone rescue package.

From Dow Jones:

Italy will cancel its mid-month auction for medium and long-term bonds, known as BTPs, "considering the large cash availability and the limited borrowing requirement," the Treasury said in a statement Monday.


The 12-month Treasury bills will be offered, it said. The T-bill auction is scheduled August 9.

Here is the first August auction to be cancelled. We expect many more to shortly follow the same fate.


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101 years and counting's picture

but, wouldnt china ride in on its white horse and suck up all that debt for far lower than market rates?

rajat_bhatia's picture

Why I'm long India... watch the foreign institution investor Flows over the past 2 months

Harlequin001's picture

I bought gold. I'm short everything...

Oh regional Indian's picture

Sovereign debt crisis overload.

Italy is a side-show too, while they scramble to figure out how to keep the bad news from spain getting out. 

Italy has Il Papa's hand on it's collective, profligate head.


JohnG's picture

There's the blog pimp troll yet again.

Nozza's picture

Wonders... Just how do I junk a post?

Oh regional Indian's picture

Ladies and Gentlemen, with the above comments I do see that ZroHedge is, tragically, on it's way to meet it's by-line, slightly modified.

On a long enough timeline, even the purest intentions get completely corrupted.



V in PA's picture

Now what do I do with my cash. :(

SheepDog-One's picture

Got a rifle yet? I suggest it.

V in PA's picture
  • 4 month supply of food for 8 people
    • generator with many gallons of gas to keep freezer cool
  • 3000+ rounds for a number of different rifles (some semi)
  • gallons of ethanol (the next currency)

but no Italian bonds!! This sucks.

Jeff Lebowski's picture

+1 for the Rigby avatar... 

Don't forget toilet paper (non-fiat).

Sudden Debt's picture

And how is your 1750 page manifest comming? Can we already read something?


Marx_it_2_market.'s picture

"4 month supply of food" ???   ROFL. 

What, pray tell, limits any of the upcoming emergencies to 4 months ?

The size of your bankroll, so it better not last longer ?
A special crystal ball and a narrow whack-job prediction ?

I can't imagine anything would be fixed in 4 months, if and when things start to fall apart.  Even the Mormons, with their agricultural-grade mindset, always had a minimum of 1 year supply of food. 

What we really face is a LONG EMERGENCY.  I suggest you go long, too, on all the stuff that really matters.  Here's the Wiki thumbnail version of the book:

Stockpiling might get you thru the short run, but buiding social networks is a deal-maker in the long run. There was a really good posting here on Zero Hedge that made this point.

Bohemian Clubber's picture

Sometimes in life whatever you do, you lose

Debt Rolling's picture

This type of action is the FAIL par excellence. "Hey, look, the end game would start for us with the current yields!". 

Very bad signal sent to the markets. They will be borrowing at 6% as soon as August, guaranteed. 

Agent P's picture

They're still auctioning bonds this Thursday.

Urban Redneck's picture

There is a shortage of non-US-AAA-contingent-short-term paper right now.  If hell freezes over and the US is actually downgraded, then the postponement of longer term auctions until attention is focused on the US could be beneficial, regardless there is no point in moving forward with the long term until the recapitalized EFSF and some Chinese reinforcements are in place.

ATM's picture

If the US is dropped from AAA that means that all states and municipalities are dropped from AAA and all US companies are no longer AAA either.

Then it stands to reason that since the dollar is the worlds reserve currency that there is not one single AAA entity on the globe.

Does that mean that all MM funds will implode and take with them trillions world wide??


Urban Redneck's picture

Non-bank US domiciled companies could maintain their AAA rating.

Other sovereigns could also maintain AAA (at least until the big 3 go on a vindictive downgrade spree at the behest of Treasury and the FED)

The lawyers will have some serious overtime billing coming due with the all the legal ammendments to make AA the new AAA (or whatever rating the US winds up with)

The problem is increased liquidity demand while there is decreased liquidity supply while everything is being re-jiggered.

Last time around Hank Paulson was throwing out unlimited government backstops and blank checks within 72 hours of the Reserve Fund breaking the buck.  Even with the quick government response- Reserve Fund holders couldn't get their money out for about 3-months from most of the examples I am familiar with.  Timmy G works public-sector union hours so the response could be slower in the face of an infinitely larger initial wave of liquidity demand.  Dry powder is useless if you can't go an a spree while the blood is flowing in the streets.    

PY-129-20's picture

Great. Just great. This will end well for my country.

Oh regional Indian's picture

PY, Are you italian? Or are you speaking of butterfly effects and unintended consequences?


DoChenRollingBearing's picture

PY I believe is from Germany.  You know, the guys who have to pay the tab for the PIIGS.

PY-129-20's picture

I am German, ORI.

My grandfather killed many Italians in WW I - both of my grandfathers thought not much of the Italian Army when they fought in WW II (which is not surprising - I mean they had to fight for them in North Africa and in Greece) - some of his great grandchildren are proud Italians today - I love the Italian culture (Brunelleschi, Masaccio and so many more) and cuisine. I have many Italian friends. There are similarities between our countries - unlike France or England we never had a strong nation. We were divided many times in the past - maybe we will be again.

I am speaking of the (un)intended consequences - things that scare me. This cursed currency and this bureaucratic moloch in Brussels will be the coffin nail for everything that has been achieved in Europe since the end of that cursed war. And it's quite ironic to listen to all this political hybris - they think they rescue the European idea with their fancy plans - instead they are planting the seeds for great and unfortunate events in the future.

Oh regional Indian's picture

Thanks for the detailed response PY.

Perhaps the great and unfortunate events are driven by forces greater than those wielding the power in Brussles.

And perhaps we are all collectively looking at is Unintended Consequesnces and thier sense-less brutality?

India is a basket case of unintended consequences. Actually intended consequences, masterfully photo-shopped centuries ago(!!!!) to look un-intended.


PY-129-20's picture

As I said - I've tried to understand India, but it still riddles me. I've read many books about India, seen many images and movies. I once travelled to India. I wish I could see it again, ORI. Maybe I will.

On a side note: I dislike this Western arrogance towards India. Have you read the 'White Tiger'?

Oh regional Indian's picture

PY, when you plan to travel here, let me know. 

And I avoid all modern Indian literature. I'm presuming this is the Arvind Adiga Book? Indian's write about India with peculiar slants (as I do I'm sure). I like mine too well! :-)

Someone's description of India as the world's ever unsure office-boy is unfortunately apt for the Indian middle class.

Such is how it is.


Spitzer's picture

Better shape then the US.

The Californias and Illinois of Eurpe are already dealing with high rates, the ECB is raising rates and austarity is coming down the pike. All long term positive for the Euro.

Mike2756's picture

Oh, if only the u.s. would adopt this measure, lol.

SheepDog-One's picture

There WAS credibility in the 'Eurozone rescue package'?

StychoKiller's picture

The Searchlight of Truth® AKA the interwebz, is making it almost impossible to get away with business-as-usual!

Chasecran's picture

Ya, CME just raised Treasury margins as well...

Version 7's picture

IMF, EFSF, start your engines!

Husk-Erzulie's picture

Price discovery... the perennial buzz kill of the central planner.

Xibalba's picture

Well THAT explains the EUR rally today

SheepDog-One's picture

Right, and upon 'no debt deal forseeable' the DOW is down -30 where its been all morning, that is until a bit before close where it will shoot green across all markets.

Utter insanity, bitchez.

Xibalba's picture

This math only works if you went to Princeton or Yale.  

TruthInSunshine's picture

I bought 100 more ounces of absurbtiuydanium today.

Friday, Merel & Sarkozy guaranteed that no EU Member would default on their debt. Less than a trading session later, Greece is in active default, with Portugal to come (then Spain, Italy, Ireland, etc.), there is talk of France losing AAA status, and both Austria and Italy cancel bond auctions...because...well, you know, AND Britain has begun its own version of QE2 now, using the pound sterling as the lubricant of choice to apply to the taxpayers' asses.

Also, the U.S., which has the world's reserve currency, is going to be downgraded, but more importantly, can't reign in its massive, bloated, public sector & it's propensity to subsidy the financial segment with Main Street taxes, with a literal economic depression having set in, and equities will probably close green (LULU and PCLN must not fall!).

China has its advanced high speed rail trains falling off the tracks like some sort of cheap Lego set, and China is also going to bail out the EU (remember that from way back last week?).


Absurbityudanium is the most precious rare earth metal at times like these.

SheepDog-One's picture

LULU and PCLN cant fall, because ETF's cant fall, the Treasury has not seized those bloated pig 401K's yet, and the FED has worked so hard funneling all the bailout money into them. Soon though.

Temporalist's picture

Don't forget, the U.S. is scared of one dirty bomb in a city yet Fukushima's cores melting is just a tiny problem...and they had another earthquake off the coast this weekend.

Also, China's GDP is dependent on "The Party" spending on empty real estate that the people can't afford.

Australia is dependent on China.

Nobody talks about France but their debt is 182% of GDP, nowhere near UK's 400% but just ahead of Germany's 142%.

And Luxembourg is 3400% debt to GDP!

The Netherlands is 471%.

*Correction* Ireland is 1100%

Norway is 538%


Exactly who the hell would want to lend money to anyone like these countries?

StychoKiller's picture

"Absurbityudanium" looks like a by-product of all the Insanium the Govt uses, so therefore I would not classify it as a rare-element!

RobotTrader's picture

I'm amazed that news like this bombards the tape every single day yet the most loved stocks like AAPL, PCLN, WFMI, etc. absolutely refuse to sell off.

nonclaim's picture

Loved? More like gang-banged...

Spitzer's picture

What are you talking about ? Turn on Bloonberg or CNBS and all the headlines are about tech companies and bullshit beating earnings. The dumb money doesn't read Zerohedge.

Temporalist's picture

I have pointed out to a few people that it's amazing that whenever there is bad news the most popular headlines are "Apple" this and "Facebook" that or "This bank says buy" it's sycophantic drivel only for the permabull momos that can't get a grip on reality.


The MSM truly believes that as long as people think things are okay that is all that matters so they spend most of their time, when not interviewing people telling them what the reality it, pumping bullshit through a firehose to douse the masses.

papaswamp's picture

I'm waiting for Jefferson County Alabama to default on it's muni bonds…that will just start the cascade in the US. August is just going to be spectacular with up and down whiplashing.

Cleanclog's picture

In avoiding price discovery, by canceling the auction, the Italian government (and its investors and financial institutions) have adopted the US financial system approach of "can't mark to market if don't have a market price - thus carry everything on the books at the values of yesteryear.  And people wonder why bank stocks are trading below book value.  Cuz book value is make-believe.  More magical thinking.

Watson's picture

Since Italian bonds trade in the secondary market, surely price discovery has not been avoided?

TruthInSunshine's picture

In avoiding price discovery, by canceling the auction, the Italian government (and its investors and financial institutions) have adopted the US financial system approach of "can't mark to market if don't have a market price - thus carry everything on the books at the values of yesteryear.  And people wonder why bank stocks are trading below book value.  Cuz book value is make-believe.  More magical thinking.


Also known as 'mark to unicorn farts & pixie dust.'

oogs66's picture

they might as well wait for the EFSF to be set up and then get their buddy droghi to get them some nice 3.5% 15 year money