Is Spain In Danger Of An Imminent LCH Margin Hike?

Tyler Durden's picture


The Greek new-election news this morning pushed sovereign spreads wider across the board in Europe. Spain and Italy have leaked back off those high spread levels in the last hour (while Portugal has not) but critically, Spain is rapidly approaching a very significant Maginot Line, as noted by Bloomberg's chart-of-the-day today. In the past (in the case of Portugal and Ireland) when the bond spread on European sovereigns relative to AAA-rated European debt has reached 450bps, the LCH has slapped on significant margin hikes. At a time when cash/collateral is in extremely short-supply (as indicated most obviously by the rapid deterioration in EUR-USD basis swaps recently), Spanish 10Y spreads are perhaps a day or two of weakness away from the point of no-return. When Portugal broke this level it rapidly accelerated from 450bps to over 800bps in less than three months.

Spanish 10Y Yields...


Portugal...tested the margin levels (was defended by ECB's SMP) and then broke and never looked back

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Tue, 05/15/2012 - 11:01 | 2427021 Cognitive Dissonance
Cognitive Dissonance's picture

Time to grow some more fingers for that very leaky dike. Don't give up just when we're about to win.

Come on boys. Stick whatever ya got into that breech.

Tue, 05/15/2012 - 11:05 | 2427059 el_brio
el_brio's picture

Sounds like a porno I rented last night...

Tue, 05/15/2012 - 11:07 | 2427067 malikai
malikai's picture

You still rent pornos? Wow..

Tue, 05/15/2012 - 11:10 | 2427074 Cognitive Dissonance
Cognitive Dissonance's picture

"Ya just can't go wrong with Hookers and Blow."

Overheard in the JPMorgue executive bathroom.

Tue, 05/15/2012 - 11:30 | 2427171 Joe The Plumber
Joe The Plumber's picture

Seriously who wants to own longer maturity bonds right now? Its been a great run these last ten years. Take ur gains now before tax rates rise next year

Whatever fancy derivative thing jpm was doing relied on spread compression to be profitable. If longer maturity bonds go lower in price it hurts the iksil trade

Tue, 05/15/2012 - 11:02 | 2427043 Joe The Plumber
Joe The Plumber's picture

Why is it so hard for the mainstream media to speak the truth? Everything you ever wanted to know about european sovereign bonds can be found at zero hedge

Tue, 05/15/2012 - 11:07 | 2427061 SheepDog-One
SheepDog-One's picture

I think theyre only fooling themselves with this 'If we bullshit everyone enough theyll believe it and happy-times will spread across the land for us and our Messiah Obama'....people are pissed off.

Tue, 05/15/2012 - 11:34 | 2427210 LetThemEatRand
LetThemEatRand's picture

Because the MSM is owned and operated by the same bankers and CEOs who are running the Ponzi.

Tue, 05/15/2012 - 13:52 | 2428102 Nobody For President
Nobody For President's picture

Oh geez - I watched the first 20 seconds and almost puked. I don't watch TV 'cause I spend so damn much time in front of the monitor watching trades on one screen and reading news and blogs on the other - this tv news is so trivial as to make one sick at heart for the people that get their 'information' from it.  I really hate the 'fuck, we are doomed' feeling I get thinking this is the 'news' that the sheeple vote for politicans on - but I digress...

There is such enormous difficulty in trying to inform the great American public about matters economic when the level of basic economic education amoung the public is so dismal. Fuck, look at the amount of usurious 20% credit card debt being carried by 'the people'. How the hell can anyone expect credit spreads between Spanish bonds and German bunds make a 10 second sound bite on MSM TV, or get within 17 pages of the front page of any major newspaper? JPM loses $2B and counting? Who cares - but didja see Dancing with the Stars last night? 

A lot of economic news just can't be dumbed down to a 10-15 second sound bite - and the base level of economic understanding is low enough that the background explanation can't be in a sound bite either, so it just does not make MSM. There is still decent articles in the NY Times and New Yorker and Atlantic and, of course, on line - but it doesn't get out to the main stream audience - or if it does, it's boring and time to go to the fridge for another beer until the sports news comes on.

When the ponzi crashes, the majority will be truly bewildered as to how the hell did this happen?

So we stack and prep as we can, and maybe try to get some basics across to our best friends and neighbors.

Tue, 05/15/2012 - 11:02 | 2427045 midgetrannyporn
midgetrannyporn's picture

It will be a priviledge for them to pay more interest to the parasitic bankers.

Tue, 05/15/2012 - 11:05 | 2427050 mayhem_korner
mayhem_korner's picture



Cut to Spain.  Cut to Hellenic Republic.  Cue Dimon.  Cut to Hollande-Merkel fest.

this movie is just too complicated for me...I'm going to pour some scotch

Tue, 05/15/2012 - 11:05 | 2427052 Confundido
Confundido's picture

Here comes another huge puke in gold, which magically starts selling off at 3am ET.

Tue, 05/15/2012 - 11:06 | 2427060 Dr. Engali
Dr. Engali's picture

Nothing a little printing won't take care of. Party on boys.

Tue, 05/15/2012 - 11:07 | 2427068 Snakeeyes
Snakeeyes's picture

Oh great. Will it never end?


Tue, 05/15/2012 - 11:14 | 2427094 DeadFred
DeadFred's picture

I wonder if the margin hikes will be required for Spanish foreign-law bonds as well? It doesn't seem fair.

Tue, 05/15/2012 - 11:17 | 2427103 prains
prains's picture

When she spreads you know it's good

Tue, 05/15/2012 - 11:26 | 2427150 sabra1
sabra1's picture

are we talkin' about janet napolitano here?

Tue, 05/15/2012 - 11:30 | 2427176 DeadFred
DeadFred's picture

Eewh! There goes my day!

Tue, 05/15/2012 - 11:31 | 2427184 Village Smithy
Village Smithy's picture

There sits Portugal, and soon to be Spain and possibly Italy paying well over 10% for 10Y's. Yet somehow we are meant to believe that they will become competitive in the global economy and grow their way, and quickly I might add, out of this. Right, I would bet that 3 dragons will appear somewhere in the world first.

Tue, 05/15/2012 - 11:53 | 2427229 Samsonov
Samsonov's picture

No one expects financial types to have much of a clue about anything outsider thier own little world, but is it too much to ask that they know what the Maginot line was, and what it represents today?  The Maginot Line was a defensive system built at astronomical expense and thought to be impregnable.  But it was conceived and built before the appearance of mechanized armies and proved completely useless.  Is that an appropriate analogy for what Spain faces today?  Perhaps you mean they're crossing the Rubicon.  Crossing the Rubicon means.....ah, never mind.  I'm tired.  Forget it.

Tue, 05/15/2012 - 14:01 | 2428152 Nobody For President
Nobody For President's picture

Paratroopers! And the Maginot Line guns were built facing East, and could not be rotated 180 degrees to face 'backwards'. 

Backwardation, anyone?


" The Maginot Line was a defensive system built at astronomical expense and thought to be impregnable.  But it was conceived and built before the appearance of mechanized armies and proved completely useless.

Tue, 05/15/2012 - 11:45 | 2427278 trilliontroll
trilliontroll's picture

Thomas Jefferson

"God forbid we should ever be twenty years without such a rebellion. The people cannot be all, and always, well informed. The part which is wrong will be discontented, in proportion to the importance of the facts they misconceive. If they remain quiet under such misconceptions, it is lethargy, the forerunner of death to the public liberty.... And what country can preserve its liberties, if its rulers are not warned from time to time, that this people preserve the spirit of resistance? Let them take arms. The remedy is to set them right as to the facts, pardon and pacify them. What signify a few lives lost in a century or two? The tree of liberty must be refreshed from time to time, with the blood of patriots and tyrants. It is its natural manure."

Tue, 05/15/2012 - 13:17 | 2427925 malikai
malikai's picture

Jefferson was a terrorist.

Tue, 05/15/2012 - 11:54 | 2427348 XitSam
XitSam's picture

"... Spain is rapidly approaching a very significant Maginot Line, ..."

Tyler, can you explain this metaphor to me? The Maginot Line was between France and Germany & Italy, not Spain. Is Spain attacking France through Belgium?

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