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Italy Prices €7.5 Billion In New Bonds At Unsustainable Yields, Market Rejoices If Only For A Few Minutes
Confirming just how much the market has lost it, at just after 5 am Eastern when the news of today's Italian auction as announced, the EURUSD soared by almost 100 pips on news that the auction had not failed. Apparently the lack of day to day bond issuance failure is now good enough for Europe. In the meantime, one look at the actual auctions that made up today's action show just how unsustainable Italian debt yields have become. The Italian Treasury priced 3, 9 and 11 year BTPs at yields that were simply laughable, and are completely non-sustainable in the long run. Specifically, the Tesoro sold €3.5bln in 6.00% Nov'14 bonds at a bid/cover 1.502. The yield was a mindboggling almost 8% or 7.89% compared to 4.93% on October 28 - a 3% increase in 1 month; it also sold €1.499 bln of 4.00% Sep'20 bonds at a 1.538 B/C vs. Prev. 1.49 and a yield of 7.28% vs. Prev. 5.470% a month earlier, and lastly €2.5 billion in 5.00% Mar'22 bonds, at a bid/cover 1.335 vs. Prev. 1.27 and a yield 7.56% vs. 6.060% previously. Yup, the 3 years were nearly 8%! Yet as noted earlier the fact that anything priced was enough for a quick kneejerk reaction higher in prices on the benchmark 10 Year BTP... If only for one hour. As the chart below shows, the BTP has sold off aggressively post the realization that the "successful" auction was almost as bad if not worse than a failure, as that at least would have kicked the ECB into monetizing.
In other news, Belgium also sold a bunch of debt at ridiculous prices. From Reuters:
Yields on short-term Belgian debt shot up to their highest levels since November 2008 at an auction of three- and six-month treasury bills on Tuesday, mirroring Monday's increase in the price the country has to pay for its longer-term debt.
The country has come under increasing market pressure over the absence of a new government since a June 2010 general election. Unlike the current, interim, government, a new government would find it easier to tackle Belgium's public debt approaching 100 percent of annual economic output, which has led to a higher cost of borrowing.
"It is bad," said Peter Chatwell interest rate strategist at Credit Agricole. "It is illustrative of the deterioration of Belgian credit that we've seen since the last auction."
However, despite the difficult auction, interest rates in the secondary market for Belgian debt had fallen slightly, he said. "Over the last two days there's been an improvement in the Belgian market."
And a full breakdown on today's miserable Itlalian auction that no matter how you spin it was abysmal from Reuters
Italian borrowing costs hit euro lifetime peaks at a debt auction on Tuesday as investors demand ever higher premiums to keep funding the country, in a sign that the sovereign debt crisis is nearing make-or-break point.
The yield on a new three-year Italian government bond soared to almost 8 percent, a level seen driving its financing costs to unaffordable levels if sustained for a long time.
The new three-year paper was trading at yields around 8 percent in the gray market before the auction, over 40 basis points more than the July 2014 bond, according to prices on Reuters.
Analysts said the huge rise in the yield on the three-year maturity -- last sold at the end of October at 4.93 percent -- supported demand and helped the Treasury place the target range of 2.5 billion to 3.5 billion euros planned for the first tranche.
In total, it sold 7.5 billion euros of bonds, close to the upper end of its target range.
"These are good auctions in terms of the amount of bids, size issued ... but the ever higher yields remain the concern," said Peter Chatwell, interest rate strategist at Credit Agricole.
"In an ideal world these yields, and the fact that the three-year was above 8 percent in the gray market this morning, would serve to give the EcoFin/Eurogroup a sense of added urgency, but this is a far from ideal world."
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GERMAN EXPORTERS ASSOC-IF ITALY DOES NOT UNDERTAKE DEEP REFORMS IT SHOULD ALSO VOLUNTEER TO LEAVE THE EURO ZONE - RTRS
AND
*ECB FAILS TO FULLY STERILIZE BOND PURCHASES
Market = Broken
Well, the whole sterilization is just smoke screen. It's full retard QE and sterilization is a lie to cover up the ugly truth that ECB is VIOLATING it's mandate.
Does the ECB publish the equivalent of the US M0, M1, M2 numbers? I would think this would help understand what's going on vis a vis the base money supply.
beyond broken! charts, graphs, trendlines, etc, totally irrelevant! this is all grand theft of all monies! everyones accounts will be seized, for the good of saving the banks, i mean world! there is no one to police, to prevent what's happening! they are all bought off, bribed! GOOD LUCK EVERYONE, SERIOUSLY!
Charts, graphs and trendlines have always been somewhat irrelevent. No?
How much did the ECB not sterilize? Why not?
Nov. 29 (Bloomberg) -- ECB said 85 banks bid a total of
EU194.2b for seven-day term deposits; it aimed to drain
EU203.5b, the amount its bond purchases have created
since the program began in May last year.
Thanks, Eu7.3b in unsterilized bond purchases (about 3.5% unsterilized) is a very insignificant amount to panic about.
In reality, behind the sterilization smoke screen, it's all unsterilized, full retard QE.
The house in really on fire... Thank god I stashed away my gold in the yard!
Gold getting dragged up and down with ES
Based on whatever "rumor" comes out that moves the Euro
Tick for tick in exact lockstep
Gold $2,000 = Dow 14,000
Gold-Dow/SPY ratio headed higher. 1:5 next target from close to 1:7 now.
An oldie but a goodie for all the idiots who want to claim a gold and equity market equivalency:
I've noticed a strange situation
The gold price and DOW correlation
It's easy to see
The Powers That Be
Have ordered this manipulation
i know you're a machine, a funny kind of machine!
Well if you think trillions in fiat is going to be printed...."things" will go up in price...that is my guess as to why the market is up...its not fundimentals...
the only fundamental int hese markets is that they are fundamentally broke
At this point how anyone can believe that yields on these stinking pieces of garbage will go down without the ECB firing up the Lexmarks is beyond me. Italy could declare that it's becoming the world's first tax-collecting anarchy and they still wouldn't be able to place a 10-yr under 7% at this point. Goddamnit, EU, just fucking print or die already, this shit has been old for awhile now.
You think the ECB isn't printing already? The only reason Italian debt isn't in double figure yields already is because of the ECB and their behind-the-scenes financing of Italy.
According to the compliance-obsessed technocrats in Berlin, printing does not comply with EU treaties or ECB mandate. This is bureaucratic thinking gone full retard.
Printing is stealing. It is criminal. You know that, don't you.
Honda, no printing in the world can help Europe at this moment. The political will is not there either. It is debt-deflation along with national defaults.
But Tesoro? They're petro. Big Italian oil. Did they lose Libyan contracts or something?
There will be more papper to throw on the fire soon.
Once the Fed stops secretely buying our debt with printed money, our US treasury yields will skyrocket also. We're next. It may begin possibly as early as next year. But whenever it begins, you can be sure that the elite banking systems will decide when.
the 3 yr didnt go up by 3% it actually went up by 70+% comapared to the last auction. Now that is truly scary. This euro short is the hardest easy trade in the world today.
Patience, my man. Patience ;)
Short EUR long what?
The USD?
@1.33 it's a damn crowded trade.
It'll go lower for sure, but wont be surprised if shorts get squeezed first.
yet stocks are up today? so far?
I’ve been trying to do the knee jerk thing but I couldn’t.
Can anyone tell me how to do it ?
Seriously, I really mean it literally: How to do a knee jerk ?
It is quite simple really, just follow the ZH method.
When ZH tells you the world is about to end, jump up in joy and happiness! When the rest of the world, markets included, refuse to agree, then allow you right foot to jerk outward from underneath your body and kick whatever might be sitting/laying/standing in front of you!
This is the classic ZH Sheeple KneeJerk Reaction(TM). You might want to whine a little bit and maybe grab a piece of gold and masturbate, but that is not actually a part of the process, even though hundreds of the ZH Sheeple faithful have added these functions to personalize their ZH Sheeple KneeJerk Reaction(TM).
Come on now, take a look at the futures this morning (GREEN!) and give the ZH Sheeple KneeJerk Reaction(TM) a whirl! Soon enough, given that ZH claims everything is pretty much going to fall apart everywhere everyday, you'll be kicking and whining and cumming to a degree that will annoy your neighbors! That is if cave dwelling troglodytes such as ZH Sheeple actually have neighbors :)
Seriously though, I am serious. You guys need to get a woman, get a life and get a clue!
BAM BAM BAM!!!!!!!
What's that, oh just the sound of a same tired old drum this troll bangs on, saying the same tired thing again and again.
BAM BAM BAM
http://www.youtube.com/watch?v=229nfiFz_KY
How to play the bond market. Watch, copy.
Shouldn't the longer term be priced much higher?
F*ck it, that's it. I'm taking the rest of the year off.
The FX market has been a total freakin joke the last 6 months. 100 pip rally on such a poor bond result... bah!
You'll be back, like a moth to the flame...
Flapping and screaming while I burn.. you're right i can see it already. :)
"The Italian Treasury priced 3, 9 and 11 year BTPs at yields that were simply laughable, and are completely non-sustainable in the long run..."
You forgot: depending from your inflation expectations...
Rothschild made a pile in the 19th buying Russian Empire bonds with yields up to 20% and marketing them well in London.
I want a meeting with Hank Paulson so I can know what exactly is going on...and then trade on it....isn´t that how it is done..
Smartypants, Tesoro is the Spanish one, not the Italian.
"In other news, Belgium also sold a bunch of debt at ridiculous prices."
This whole market is behaving in a ridiculous fashion.
Haha good one. Metal detectors. What a dum one.
HMMmmmmm PIZZA!!
Although the Europe and the US is a disaster, price action in equities and also currencies is telling a different story. Here is a significant updated outlook for the SPX in the weeks ahead. http://bit.ly/sB2epS
Your yield is too high? Try getting along with less credit.
You can price them at 20% when you have little intention of actually paying them off. Just playing for time waiting for that deus ex machina that will save the world, Krugman's alien invasion.
Another way to look at a yield increase of from 4.93% to 7.89% is that it is an @ 35% increase in what the Italians have to pay in interest since October 28th. Yes it is an increase of 3% in the interest rate, but the interest rate has gone up at an annual rate of @ 400%
Remember today. It shows how people can be shifted to, and maintained in, stupidity.
As a Main Streeter who attends ZH just about every day, I'm given reason to shake my head at the bullshit stew which is served with the bread and circuses on the financial porn stations.
They were, of course, touting the auction for the seemingly positive turn out and the green triple digit NYSE futures. Fuck the debilitating price/yields, as the credit markets steadily erode the EU policy alternatives, country, by country, by country.
That's how you end up with blind squirrell retail investors. I'm sitting at work right now with some really smart people (I'm not), who missed the Part II realization of today's story. And think all will be well if the S&P, can break resistance, and Santa Claus will throw them 50-100 pts into the end of the year.
I just smile and nod.
Everybody here just hopes they have a job when they come in tomorrow. And to some's credit, they are the ones counted in the post-QE2 and continuing retail mass evacuation from equities in ICI's Flow of Long Term Mutual Funds.
They aren't coming back to stocks for a long time, if ever.. People who are around 60 are planning to eat catfood and work 6 months past their death. They would rather be in net-neg bonds, than have to wear a neckbrace when they look at their 401k's.
As conservative as they are being, they have no concept of that which is coming.
Because the happy pom-pom spinners keep telling them everything is going to be OK.