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With LTRO Out Of The Picture, Portugal Is Back In Play - Bonds Sliding

Tyler Durden's picture




 

As the ECB has stopped its SMP bond-buying and now the LTROs are all done (until the next one of course), Portuguese bond spreads have been increasing rapidly and post-LTRO today even more so.  While broadly speaking European sovereign risk is modestly higher this week (and notably steeper across the curve) leaving funding costs still very high for most nations, Portugal has exploded over 100bps wider (and almost 70bps of that today post-LTRO) to back over 1200bps wider than Bunds. Only Italian bonds are better and even there they are leaking back to unch from pre-LTRO. Perhaps, shockingly, more debt did not solve the problem of too much debt and with growth and deficits being questioned in Ireland and Portugal (and Spain), it's clear the newly collateralized loan cash the banks have received won't be extended to the medium-term maturities in sovereign bonds.

 

It seems clear that the Portuguese banks just couldn't find enough collateral to be able to enact the hari-kari actions the Italians and Spanish are undertaking.

 

 

As with many other curves, the last two weeks have seen the risk being 'shoved' out the curve - which of course is where the sovereigns fund themselves and so does not help at all...

Chart: Bloomberg

 

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Wed, 02/29/2012 - 09:12 | 2207425 battle axe
battle axe's picture

Portugal meet Greece, you guys might have a few things  in common...

Wed, 02/29/2012 - 09:19 | 2207444 bdc63
bdc63's picture

NEXT! ....

Wed, 02/29/2012 - 09:39 | 2207504 trav7777
trav7777's picture

Spain and Italy?

gonna find out how stupid it was letting greasy countries like greece issue bonds in euros. 

Wed, 02/29/2012 - 11:50 | 2207989 noses
noses's picture

I thought *buying* these bonds was the stupid part.

Wed, 02/29/2012 - 12:24 | 2208234 Thamesford
Thamesford's picture

We also need a more inclusive regional economic description.

Forget PIIG's

Embarace the

Western

Exhaustingly

Indebted

Nonplused

Ecomonic

Regions

's

 

 

Wed, 02/29/2012 - 14:09 | 2208815 Zero Debt
Zero Debt's picture

Actually Portugal has a lot in common with.....dumroll..China.

China has a Debt to GDP of around 90%, very similar gearing as Portugal:

Central Governt Debt: 16.3% of GDP

Ministry of Railways: 4.5% of GDP

China Development Banks and Policy Banks: 10% of GDP

Local Governments and Financing Vehicles: 20% of GDP

State Asset Management Companies: 7.5% of GDP

Source: SCMP Feb 24th 2012

Wed, 02/29/2012 - 09:12 | 2207426 RacerX
RacerX's picture

"Perhaps, shockingly, more debt did not solve the problem of too much debt"

Yes, *shockingly*. I believe we'll find out what happens when even-more debt is added. That'll be the double-shockingly.

Wed, 02/29/2012 - 09:39 | 2207502 anti Oligarchy
anti Oligarchy's picture

I think this amount of new debt loaded into the systems deserves a six pack salute with Shock Top

Wed, 02/29/2012 - 09:15 | 2207436 The Swedish Chef
The Swedish Chef's picture

They told you LTRO was to ease pressure on sovereigns and you bought it. LTRO 1 made commodities and stocks rally. Look there but don´t look today. Come back in a month and tell me stocks and commodities haven´t rallied...

 

 

Wed, 02/29/2012 - 10:09 | 2207582 CharlieSDT
CharlieSDT's picture

Nah, it's only 311 bil, that's chump change these days.

Wed, 02/29/2012 - 09:19 | 2207445 disabledvet
disabledvet's picture

well..."did zero percent financing solve the problem of American indebtedness"? What? "No! It made it worse!" REALLY???? WELLL..."Thank God governments never overspend and are being responsible" then....

Wed, 02/29/2012 - 09:19 | 2207446 RobotTrader
RobotTrader's picture

When in doubt, or if you detect the slightest whiff of financial trouble:

 

Buy AAPL

Buy Lululemon

Buy Under Armor

Buy Limited Brands

Buy Chipotle

Buy Select Comfort

Buy Starbucks

Buy U.S. Treasuries

Buy California Muni Bonds

 

Any questions????

Wed, 02/29/2012 - 09:25 | 2207452 valley chick
valley chick's picture

yeah...one question....are you kidding?  I know you have more "experience" than I but wouldn't want to give you a dime of my money to invest.  ;-)

Wed, 02/29/2012 - 09:27 | 2207460 azzhatter
azzhatter's picture

RobotTrader- are you really Cramer? >sarc

Wed, 02/29/2012 - 09:33 | 2207479 EvlTheCat
EvlTheCat's picture

Yes. How many days should I ferment my mango mash in my secondary fermenter before I rack it?

Wed, 02/29/2012 - 10:25 | 2207629 clones2
clones2's picture

about a week? ;-)

Wed, 02/29/2012 - 10:15 | 2207598 Death and Gravity
Death and Gravity's picture

Yes.

How do I get out of this chickenshit outfit?

Wed, 02/29/2012 - 09:22 | 2207448 Reese Bobby
Reese Bobby's picture

They are getting the hang of it in Europe.  ECB shovels money to insolvent banks, they let Portuguese government debt tank, and then the insolvent banks come in and buy the crap cheaper.  How hard is that?  Great long-term plan.

Wed, 02/29/2012 - 09:26 | 2207456 RobotTrader
RobotTrader's picture

Yep, another "Self-Reinforcing Feedback Loop"

 

The world's central banks are now the most profitable hedge funds in the world.

They manufacture their own crisis.

Then frightened investors drive down U.S. interest rates.

Banks borrow U.S. Dollars via swaps at zero cost.

Banks step in and buy the crappy debt and "stick save" the system.

Investors are overjoyed, ao fund managers step up and buy more consumer discretionary stocks.

Sovereign bond prices recover, central banks sell back to enterprising hedge funds, instant profits are made.

Then it is back to Step 1.

 

How easy is that?

Wed, 02/29/2012 - 09:38 | 2207500 Moneyswirth
Moneyswirth's picture

Lather

Rinse

Repeat

Wed, 02/29/2012 - 09:40 | 2207503 valley chick
valley chick's picture

Robo, you really need to take your shit show on the road....;-)

Wed, 02/29/2012 - 09:39 | 2207508 Theta_Burn
Theta_Burn's picture

Seems to be the script up to now.

BUT the unscritpted ending is (oil @ 120+)(inflation @ 5%+)

What will the meme be next mnth?

 

 

Wed, 02/29/2012 - 09:27 | 2207457 LongSoupLine
LongSoupLine's picture

Don't worry, Alan "I should be in butt-fuck prison" Shwartz of Bear Strearns is on CNBS saying everything's great....asshole.

Wed, 02/29/2012 - 10:01 | 2207559 bdc63
bdc63's picture

I was watching too.  They got all nastalgic about the good old days of MBSs (I kid you not).  Then the CNBC crowd basically asked him where the next bubble would be, and his answer was I don't know but I'm on the lookout for it.

I can't believe one of the camera men didn't come over and bitch slap the mother fucker.

Wed, 02/29/2012 - 09:29 | 2207462 azzhatter
azzhatter's picture

How does CNBC have any credibility when they bring on the former CEO of BS? Who's up next- Bernie Madoff

Wed, 02/29/2012 - 09:30 | 2207472 Moneyswirth
Moneyswirth's picture

Thank you.

They lost me when I heard "Coming up on Squawk Box, the bull market is on....how high will it go..."

Idiots.

Wed, 02/29/2012 - 10:17 | 2207604 Pegasus Muse
Pegasus Muse's picture

You ask this about an outfit that features Cramer, Kernen, Liesman, Pisani ......   ?!   lol

Wed, 02/29/2012 - 09:29 | 2207465 Moneyswirth
Moneyswirth's picture

I think I will personally issue some IOUs backed by the cash flows from Moneyswirth, Inc.  I will then be taking those IOUs, and offer to purchase some Portugese Government bonds, using the aforementioined IOUs as collateral for my purchase. Trust me, Moneyswirth Inc. debt is good stuff.

This is pretty much how it works for central bankers amirite?

Wed, 02/29/2012 - 09:36 | 2207493 ballafun
ballafun's picture

Why LTRO is out of picture, it will again come, LTRO N.0, this time with N B Euros, and save N no of soverign countries.... Let us all rally... No point in worrying about what will happen!

Wed, 02/29/2012 - 09:37 | 2207496 Moneyswirth
Moneyswirth's picture

Meanwhile:

European Banks Flock to Second Round of Cheap Loans

Banks borrowed 529.5 billion euros, or $713 billion, compared to 489 billion euros in December, when the E.C.B. unleashed the first salvo of three-year loans.

Mario Draghi, the president of the E.C.B., said the loans were designed to avert a credit crunch, but there are signs that many banks are hoarding cash rather than lending to businesses and consumers.

HA HA HA HA

Wed, 02/29/2012 - 09:40 | 2207501 Dick Darlington
Dick Darlington's picture

Barroso "kiss of death"? =D

*BARROSO: PORTUGAL MAKING PROGRESS IN CHALLENGING CIRCUMSTANCES

*BARROSO SAYS PORTUGAL IS `ON TRACK' WITH REFORMS

 

And btw, hearing talk ECB is buying Portugal today. When you're losing you double... Good luck with that...

Wed, 02/29/2012 - 09:44 | 2207513 Martin W
Martin W's picture

I like the word "Hari-Kari". It's a prefect word for 2012 economy.

 

Hari-Kari Bitchez!

Wed, 02/29/2012 - 09:45 | 2207519 chindit13
chindit13's picture

I can see at least 40 explosive rallies over the next few months driven by headlines saying, "Progress made in Portuguese deal".

I've picked up a case of Quinta do Noval 1994 Vintage Port, and I'm just going to sip back and enjoy the show.

Wed, 02/29/2012 - 10:08 | 2207579 monopoly
monopoly's picture

Yes Robot, it all seems to work as you say, until interest rates start up, and they will.

And Portugal is just a small country like Greece. Nothing to get upset about. Think small.

Wed, 02/29/2012 - 10:19 | 2207612 stickyfingers
stickyfingers's picture

Nós não somos a Grécia!

Wed, 02/29/2012 - 10:21 | 2207613 stickyfingers
stickyfingers's picture

According to Google, We're not Greece!

Wed, 02/29/2012 - 10:36 | 2207657 vote_libertaria...
vote_libertarian_party's picture

It's not about LTRO.  It's about how any day now all of those default insurance contracts are about to go POOF!

Wed, 02/29/2012 - 10:37 | 2207658 satan2liberals
satan2liberals's picture

"more debt did not solve the problem of too much debt "

 

Yeah but somebody forgot to tell the equties market, the past 3 months have been nothing but the mother of all short squeezes.

 

I'm out , the politicians and bankers have this market rigged (no cds trigger, unilaterally changing terms of contracts etc etc.)

Seems the only smart thing to do is sell VOLATILITY.

Wed, 02/29/2012 - 10:57 | 2207718 jm
jm's picture

Ultro-2 is, among other things, a way for Italian and Spanish banks to put a bid on their home country debt. 

Portugal not so much. 

Wed, 02/29/2012 - 11:26 | 2207862 chinaboy
chinaboy's picture

Whoops, LTRO 3 is called for

Wed, 02/29/2012 - 13:13 | 2208536 Frein
Frein's picture

Do you mean "harakiri"?

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