Nomura: "Spain Will Need Full-Blown Bailout"

Tyler Durden's picture

While hardly saying anything new, more and more pundits are waking up to the reality that faced with an environment of epic capital outflows predicated by a complete loss in the system (see Greece), Spain simply can not survive. We wrote about the record outflow in Spanish deposits last week (here and here) and the fact that with banks urgently seeking to plug liquidity holes, coupled with soaring NPL levels, in the absence of actual profits they are forced to sell all those SPG bonds they had been purchasing during the open ponzi phase, where ECB funding would be recycled by local banks to meet primary market demand. Overnight even the New York Times has finally understood this simple identity: record outflows = the end. And now, the banks begin to chime in, pointing out what is patently obvious: from Nomura - "Spain will need full-blown bailout which will include more active role of ECB in Spanish bond markets."

More from Bloomberg:

  • Capital flight from Spain is in a "category of its own," with extreme, broad-based outflows raising “serious concerns about the implications for banking sector stability and economic growth,” Nomura strategists Jens Nordvig and Charles St.-Arnaud write in client note.
  • Capital outflows on 3-month rolling basis at 50% of GDP vs Italy 15%; for comparison, Indonesia outflow during Asian crisis peaked at 23%
  • Foreign selling of Spanish securities in 2Q equal to 19.4% of GDP; also liquidate Spanish bank claims at 15.3% of GDP in 2Q
  • Spanish residents shift funds to foreign banks at rate of 16.7% of GDP in 2Q
  • Spain fills capital gap through Target 2 borrowing, currently at €408 bln or 39% of GDP;
  • Overall capital flight from euro zone vs rest of world "normalized to some degree" after earlier outflows: SNB intervention in July at €35 bln, about half of May and June; TIC data for June show US investors net buyers of euro zone bonds, euro zone residents modest sellers of US Treasuries

And picking up on what we wrote last night, namely that Spain is running out cash, here comes Daiwa doubling down on Nomura's conclusion:

  • Spain using treasury debt to recapitalize Bankia pushes Spain toward requesting full sovereign bailout, Daiwa Capital Markets credit analyst Michael Symonds says in an interview.
  • The use of treasury debt is “designed with Spain’s tight liquidity position in mind,” allowing Spain to avoid drawing on its “dwindling” cash reserves
  • Govt needs cash to maintain deficit spending and to pay out ~€20b bond redemption in October

In other words, just what you read here first last night.

Finally, this is how the Spanish endgame looks visually.

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SeverinSlade's picture

ZH = winning, as always.

Roger O. Thornhill's picture

This doesn't make sense, weren't the Spanish banks offering free spiderman beach towels for deposits?


OneTinSoldier66's picture

Entertainment used to come from watching Sci-Fi's. Now it comes from watching SIFI's.

hampsterwheel's picture

So what do deposits really matter in a fiat fractional reserve banking system - especially in the EU where they are not even limited to 10 to 1? So what if a bank has zero customer deposits - ctl + P - ?


GetZeeGold's picture




Geez.....I slipped them a twenty yesterday!

SheepDog-One's picture

Spain has the get 'fully bailed out' by WHO? Are we STILL pretending someone is standing by with a bunch of free cash to throw around? Freaking ridiculous bullshit.

Leopold B. Scotch's picture

You miss the point:  If you just say "bailout" enough times, everything will take care of itself.  (The trick is you have to click your heels three times while saying it.)

laozi's picture

IMF will come to the rescue in the end with newly printed SDRs (standard drawing rights). That is the ace in the sleeve.

Jason T's picture

Where is the panic?  

falak pema's picture

Cos zombies print to infinity and beyond.

americanspirit's picture

Dear Jason T - you must not have any friends in Spain. I do and they are absolutely panicing. Have been for several months actually. We don't see it because the press doesn't report it. Wouldn't want to panic people, ya know.

Poundsand's picture

Drudge report just put it up.  "Fears rising, Spaniards Pull Out Their Cash and Get Out of Spain."  Quoting from CNBC.  It's about to get real.

Dr. Engali's picture

June shows the U.S investors are net buyers of Eurozone bonds? WTF? Are they so starved for yield that they will buy any crap out there?

Everybodys All American's picture

I thought Corzine was out of the business?

GetZeeGold's picture



Oh.....he's coming out with brand new hedgefund. How much can we put you down for?

BurningFuld's picture

Don't be naive. Timmy has given the word to his friends that they will be covered for any and all loses on those bonds.

sessinpo's picture

Supports what I said on the other thread, Is Spain Running Out Of Cash? . Lots of Germany bashing, but it is the ECB and the central planners that should get the bashing.

From article: And now, the banks begin to chime in, pointing out what is patently obvious: from Nomura - "Spain will need full-blown bailout which will include more active role of ECB in Spanish bond markets."    


Because their debts are Euro denominated, they have to go to the mob who has the monopoly on those debts, the ECB. PERIOD! Germany can't print those Euros, only the ECB can. They (ECB) are the source, they are the problem just like the FRB is the problem over here and for all US dollar denominated debts.                                                  

FeralSerf's picture

Greece has already shown the way to print their own euros.  Spain can and will do the same.

SheepDog-One's picture

Just make it illegal to withdraw any money from a bank and mandatory you desposit your entire paycheck in. May as well, we're already long past 'full-retard' here, why even pretend anymore?

BadKiTTy's picture

Why pretend? I reckon because pretending makes people feel better....safer.....

And that is what is counted on. Those who stop pretending have to face the discomfort of reality, and so have to act (or will begin to sense the need to act).

The majority will be taken completly by surprise.  Pension.....gone. Social security.... gone. Democracy.... gone.  Freedom.... remember that?

History is full of examples.... Hitler, Stalin, Mao, Mussolini.... take your pick.  

Gentler types cannot imagine how the 'will to power' grips some people.  

Someday they will, as their forefathers too were reminded. 






falak pema's picture

AH the Draghi "Grosso" chimes accross mediterranean rim; what will Mutti say to that?

The Axe's picture

yet ???  rates are dropping like a fat lady holding a piano?//  

sodbuster's picture

Dow 15000, bitchez!!! Full retard!!

GetZeeGold's picture



I know. It's's almost like they're just throwing money at it.


philosophers bone's picture

Thankfully we have the firewall.  How's it doing by the way?

bushwarcrime's picture

Put a fork in it.  This is so sad, remember this day.  50% outflow vs. GDP, staggering.  Pray for the Spaniards.

11th_hour's picture

Full blown corporate / big money spanish banking run.  Data is out (conveniently) long enough to be disseminated and digested before Sept 12 decision.   

Stuck on Zero's picture

Spaniards move their deposits to Great Britain and Germany.  Isn't that like moving to the rear of the Titannic as the bow starts to go under?


bentaxle's picture

Is Corzine in Spain now?

Dareconomics's picture

One of the unintended consequences of Internet is the creation of the blogosphere. Now, bloggers can be a little wacky, and the editorial controls on the average blog (including this one) are lax. However, the blogosphere has consistently been beating the Mainstream Media to the punch during the Eurocrisis.

The Mainstream Media has access to the same economic and financial numbers that the blogosphere has, and, yet, it took these media outlets significantly longer to begin writing about the need for a Spanish bailout. I came to this conclusion almost two weeks ago, and other people were writing about this before then. What is taking the media so long to get on board here?

I believe that a full journalistic apparatus with editorial standards is actually to blame for the slow response time. One advantage that the journalists have over the blogosphere is that they have access to the politicians, banksters and bureaucrats that are making decisions. Since they have this access, they believe it is worth something and rely on it way too much. Mainstream journalists merely parrot the quotes of these people and do not point out the inconsistencies of what they are saying.

Currently, the Spanish Finance Ministry is claiming that it will hit its 6.3% of GDP budget deficit goal for the year. The Mainstream Media keeps reporting this figure and takes the Spanish government at its word for some reason.

Did you know that for the first half of the year the deficit was 4.04%. Double that figure and you see that the budget deficit is on pace for 8.1%, but no one from the mainstream outlets are reporting that Spain is way off track with its budget. Since they are unaware of this fact, they are also unaware about how dire the Spanish situation has become.

Why is this? In order to maintain access to the politicians, banksters and bureaucrats, it is important not to question the veracity of their claims. Journalists do not wish to lose access to their sources, so they do not rankle their feathers by openly questioning what they are told. Of course, if you cannot question these sources, what good are they anyway?

If you want a quote from Rajoy, continue reading the MSM. If you want to know how the Eurocrisis is developing, then you'll need to read the blogosphere.

RiskAverseAlertBlog's picture

Doesn't a significant write down of Spanish banking system debt appear the likely course forward, particularly as Greece already breached this barrier erected by every incompetent central banker and treasury official ever since this nightmare began a few years ago? It seems, too, that eventually Germany will be left with choosing the lesser of two evils, either of which stand to negatively impact its banking system. One could imagine Germany is having a "Fram" moment: "you can pay me now or you can pay me later."

Colonel Klink's picture

Spanish fry bitchez!