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Latest China Bailout Rumor Crumbles As EFSF Pulls Bond Due To "Market Conditions", France-Bund Spread At Record

Tyler Durden's picture


Once again the desperation level is high as seemingly the core driver of overnight strength was a rumor that China would inject €700 billion in the EFSF, coupled with the even more desperate expectation that in a few short hours Ben will launch the LSAP version of QE: something that is virtually impossibly unless stocks drop to triple digits, and a fact that the market with its constant attempts at Fed frontrunning makes practically impossible. Yet this was good enough to tighten the all critical Italy-Bund spread to 422bps overnight (recall it hit the catastrophic 455 bps yesterday). However some news since then have put a major damper on sentiment, notably another recessionary data point from Europe, where the October Manufacturing PMI printed at 47.1 on expectations of 47.3, and German unemployment posting a rare disappointing miss printing +10K on consensus of -10k. Yet the nail in the coffin for today's European action was that the EFSF, which as we noted already reduced its €5 billion Irish bailout package to €3 billion on subpar market demand, pulled the entire issue citing the trusty old fallback "market conditions" confirming that not only is the latest China bailout rumor a complete fabrication yet again (as explained both here and here). What is more troubling is that the EFSF has set off on its path to raise €1 trillion+ with an epic failure and an inability to raise even €3 billion. That realization has finally spread to the market and not only is the Italy-Bund spread back to morning wides at 438, but, just as disturbing, the French-Bund spread is back to all time wides of 123 bps! That the European interbank liquidity market just collapsed again with ECB deposit facility usage hitting a three week high of €229 billion, coupled with Euribor-OIS spread jumping +6 bps in a week to 0.86% and just off the 3 year highs of 0.89%, is certainly not helping things. Look for more mayhem out of Europe as the G-20 meeting slowly unwinds over the next day, and the complete lack of organization in Europe is exposed for all to see all over again.


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Wed, 11/02/2011 - 07:26 | 1836049 Irish66
Irish66's picture

No more Twist

Wed, 11/02/2011 - 07:30 | 1836056 sunnydays
sunnydays's picture

They are going to have to give up Pulling an imaginary rabbit out a Hat now!   They can't just run on rumors over and over again as this proves all the rumors were lies. 

I would say GAME OVER!

Got Metals?

Wed, 11/02/2011 - 07:36 | 1836063 Quintus
Quintus's picture

Not just the rabbit, the hat is imaginary too.

Wed, 11/02/2011 - 07:31 | 1836058 myne
myne's picture

Pfft. This is the #1 policy tool of all governments and agencies globally:

Wed, 11/02/2011 - 07:47 | 1836087 ArkansasAngie
ArkansasAngie's picture

But .. but ... Obama going to be there.  Doesn't that mean that the globalist will when hands down?

Hands down?  Watch for under the table touchie feelie.

There are many many way to screw the 99%'ers.

You can bet that Obama will be in on the action.


Wed, 11/02/2011 - 09:10 | 1836306 Ronaldo
Ronaldo's picture

Maybe the Salsa!

Wed, 11/02/2011 - 07:27 | 1836051 qussl3
qussl3's picture

If I'm china why the hell would I buy bs paper when I'll be able to buy corporates on the cheap if I wait?

Wed, 11/02/2011 - 07:28 | 1836053 Cassandra Syndrome
Cassandra Syndrome's picture

There is a redemption on Irish debt of over €4 Billion Euro on November 11th. That EFSF auction was for meant to cover that. Interesting to see what happens before then.

Wed, 11/02/2011 - 07:36 | 1836064 Irish66
Irish66's picture

IRE looks like death watch

Wed, 11/02/2011 - 07:31 | 1836059 zedder
zedder's picture

Added to my euro short a few hours ago. Thanks to zero hedge for pointing out the record euro short last week. This whole episode is understood by the main market participants. Is this the beginning of the end for the euro? Who cares, for the rest of us this may be a great chance to make some great fiat money from this chaos...

Wed, 11/02/2011 - 07:42 | 1836061 Youri Carma
Youri Carma's picture

German manufacturing shrinks in Oct for 1st time in 2 years: PMI, 2 November 2011, by Sarah Marsh - Berlin (Reuters)

Ambrose Evans-Pritchard: Why the Greek decision means a complete unravelling of last week's deal, 1 November 2011, by Ambrose Evans-Pritchard (

REMINDER: Here's Who's Freaking Out Now That Greece Will Hard Default, 1 November 2011, by Mamta Badkar and Simone Foxman (Business Insider)


German government debt exposure to Greece totals $14.1 billion

French government debt exposure to Greece totals $13.4 billion

UK government debt exposure to Greece totals $3.96 billion

Italian government debt exposure to Greece totals $2.4 billion

U.S. government debt exposure to Greece totals $1.94 billion

Belgian government debt exposure to Greece totals $1.9 billion

Switzerland's government debt exposure to Greece totals $529 million

Spanish government debt exposure to Greece totals $502 million

Wed, 11/02/2011 - 07:35 | 1836062 bank guy in Brussels
bank guy in Brussels's picture

George Papandreou's announcement of the Greek referendum, has been a terrific boost to the spirit in the streets of Europe, however much he is criticised by European leaders, and whatever the consequences to the markets.

Even if Papandreou's government falls, it may be very hard for any subsequent government to 'cancel' this popular referendum.

Papandreou may have redeemed himself with his bold act favouring the will of the European common peoples. European populism may have just begun a great new phase.

Recommend to everyone a hearty laugh with the art of William Banzai yesterday, especially his 'The Great Euro Race' which may be an apt photo snapshot of the European sovereign situation:

Wed, 11/02/2011 - 07:39 | 1836073 Cdad
Cdad's picture

WTF has caused the Euro to rise 140 pips while I slept?  Seriously, was the Pacific Ocean a huge buyer last night?  Are you saying it was a China to the Rescue story...AGAIN...that caused this rise?

OK...previously, I would have been content to see all MF Global managers locked up...but now...serioulsy...let's just arrest them all.  Everything on Wall Street has become entirely criminal...everything...everyone...every broker dealer...all of them...if China to the Rescue AGAIN is the reason.  Fucking Marxist bankers!

Wed, 11/02/2011 - 07:48 | 1836088 qussl3
qussl3's picture

Might have to do with the 600+ pip move off the highs and those with profits not wanting to call Banana Ben's hand?

Wed, 11/02/2011 - 09:09 | 1836300 disabledvet
disabledvet's picture

"kiss of death."

Wed, 11/02/2011 - 07:53 | 1836100 bsdetector
bsdetector's picture


Wed, 11/02/2011 - 07:56 | 1836104 THE DORK OF CORK
THE DORK OF CORK's picture

Euro famine next year in Ireland , although somewhat offset by a massive deflation in potatoes

Well there is always hope.....................a few years ago our saviour was born.



Wed, 11/02/2011 - 07:54 | 1836105 Forgiven
Forgiven's picture

It looks like the sea of corporate and sovereign paper has finally crowded out the horizon.

Wed, 11/02/2011 - 07:59 | 1836110 sabra1
sabra1's picture

all this is a distraction from what is happening in the middle east! sure seems quiet over there lately, NOT!!! massive positioning of troops near the iranian border! watch both hands people, not just the left one!

Wed, 11/02/2011 - 08:10 | 1836122 Dr. Engali
Dr. Engali's picture

Everybody is crying for uncle Ben to print but the market won't give him the conditions to print. Hilarious.

Wed, 11/02/2011 - 08:17 | 1836139 arkel
arkel's picture

I'm surprised they were even able to sell 3 billion EFSF bonds. Why would anyone buy that crap. I'd rather invest in tulips than that black hole.

Wed, 11/02/2011 - 08:38 | 1836183 lizzy36
lizzy36's picture

WTF they can't get off a EUR 3B bond and we are going to rally.

This is like rallying on Operation Overlord failing.

This is insane.

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