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The Morning After (The CDS Ban)
From Peter Tchir of TF Market Advisors
The Morning After
Sovereign CDS is tighter and SOVX is a lot tighter. I'm not sure by exactly how much as that products is heading the way of EDS's (equity default swaps) and binary bonds (100% payout after a Credit Event) or TRS on high yield bond indices. Sov CDS will not look like other interventions. Those typically seem to work for awhile and then the market returns to normal. I expect Sov CDS volumes go dwindle as naked short ban hits home, as the EU attempts to avoid a CDS credit event at all coats reducing their practical use to any bank that actually cares about risk managed returns, and finally the likelihood of some form of EFSF or ECB selling. The market will move on. SOVX is a relatively new product and until recently CDS on sovereigns were dull. At some point people will hang on to CDS because there will be a time all the contagion caused by EFSF (linking all the countries to the weakest fits any normal definition of contagion) will create a negative momentum that the EU and ECB can't manipulate around. I for one will not be watching Sov CDS for meaningful insights into the market in the meantime.
Main is decently tighter - about 5 on the day. How much of that is a spillover from bad shorts in SOVX versus real strength in Credit remains to be seen.
In the real world Italian, Spanish, French and German yields are all higher. Yes Spain and Italy are tighter but the convergence is coming with an overall move lower in a weaker European bond market. Germany and France performing poorly is not surprising, but I would have thought the market would have given Italy and Spain a reach around on such a momentous day.
At one time the EFSF was going to issue 440 billion euro to buy bonds. I bet that less than 500 billion EFSF wrapped bonds will be ever issued. It would be ironic, but plausible, that they have actually shrunk the effective size of the EFSF. Demand for bonds with a 20 per cent first loss wrap that is provided by countries headed on a negative credit trajectory may not be as great as people expect and is also likely to cannibalize from investors who would have bought normal bonds.
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Fixed. Wheeeewww...
who'd have thought that french bonds disappearing down the plug hole in price terms would have been good for the euro?
Pair that with Syntagma 2.0 and it almost makes the EUR ramp look desperate.
Perhaps the "good" Italian numbers will save the world.
there have only been denials of the guardian story this morning so you have to wonder how high the euro spikes on an actual announcement. we need to see riots in berlin.....
I know, almost aching to short it now, but come monday we may see a spike till wed before someone begins to ask how the hell they are going to pay for it.
The insurance plan cant work either, nothing works as long as yields keep rising, especially now when French and possibly German yields are happily stair stepping up.
What a clusterfuck.
as soon as the details are released it will be curtains.
Details?
We dont need no stinking details!
They'll just get News of the World on the case next anyways.
Difficult for a non credit au fait, acronymically challenged, sans PhD person to decipher... but bullish I guess
Protesters piling up at Syntagma..so are military...be heard and be safe!
Chained Destruction Sequence abort failed. countdown proceeds undistrupted. Shadow Banking System about to enter media radar and explode.
Market pricing in a German and French downgrade bitches!
German Bund auction failed today.
http://www.reuters.com/article/2011/10/19/markets-bonds-euro-idUSL5E7LJ1...
"German Bund futures fell to a session low on Wednesday after a German 10-year bond sale met weak demand, with the number of bids failing to cover the amount of paper on offer.
The 5 billion euro bond sale drew bids for 4.55 billion euros."
You know, the embarrassing part is that we will get sovereign creep out of this....government needs to raise 5B so they offer 10B in bonds. It will come to be considered, rather than a failed auction, adequate after the MSM megaphone gets done.
I would think the naked selling ban on Euro-sovereign CDS might have a negative effect on EURUSD and European equities - or at least increased purchases of equity or FX Put options - as people look for other affordable hedges for a default event in Europe.
THEY GOT NOTHING AND WON'T HAVE NOTHING BY THE WEEKEND, WHISHING TO DO 2 TRILLION IS NOTHING!!!!
SANTA WON'T COME THIS YEAR UNLESS THEY SELL OFF FIRST AND IN A BIG WAY WHICH IN THEIR STUPIDITY, THEY WON'T!!!
ANYTHING ESLE IS PURE DESPERATION AND THE OUTCOME OF SUCH IS VERY WELL KNOWN BUT MAYBE VERY WELL DENIED!!!
Ban is scheduled for fall 2012. Calm bitches!
It still amazes me that these market tea-leaf readers still abound, swirling the tepid water, dutifully gazing deeply into freshly concocted patterns, pronouncing pure nonsense masquerading as profundity to a stupefied public lapping thirstily at the bowl of disillusionment. Christ almighty, I'm tired of this shit. We need to stop treating lies as truth, and acknowledge the system for the tool of theft that it is.
The lies must stop.
Didn't help Greek Sov CDS.
The one year @ 12,023.279.
http://www.bloomberg.com/apps/quote?ticker=CGGB1U1:IND
I hope it will happen soon, because I'm surious to see it's effects. RCA ieftin 2012