Operation Adios Rajoy Begins

Tyler Durden's picture

As we have been discussing for a few weeks, the European markets need a risk flare for any of the oh-so-conditional firewalls, that have been heralded as cutting risk's tail, to become relevant. What is stunning is the level of disappointment that Rajoy has not requested a bailout yet (noted this morning on CNBC as the reason Europe is red today). It seems, as we pointed out Friday and yesterday, Operation Adios Rajoy is underway in the markets... Spanish bonds have pushed notably higher in yield (with the front-end leaking rather considerably), Spanish 5Y CDS are 21bps wider today, but it is the Portuguese market that we suspect is where the leverage is being applied. The Portuguese market was used as evidence of Draghi's awesomeness and while its illiquidity helped on the way down in yields, it is also hindering now - as Portugal's 10Y is now 70bps higher in yield in the last two days - notably back above an unsustainable 8% (at the same time as government revenues missed expectations - shocker). Risk flare-on.

Portuguese 10Y yields are ripping higher in the last two days...


We suspect the basis trade is largely responsible for this as it peaked back above -100bps and now that liquidity is flooding back out at the margin. It was a great trade - predicated on the falling probability of some OSI/PSI workaround to flummox the CDS players...

Portugal CDS-Cash spread (lower means Bonds wider/riskier than CDS)... so once again CDS traders 'saved' the European bond markets...by arbitraging the illiquidity


and pressure on the over-exuberant Italian (stock) market is starting to pile up...


Charts: Bloomberg

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
SmoothCoolSmoke's picture

Calls going out to Goldman "who's your man for the Spanish slot?"

Dead Canary's picture


"Dammit, we're running out of shills to fill all these spots!"


GetZeeGold's picture



It's true.....I checked the junk drawer.


Damn....not a single shill. We never run out of those!


smlbizman's picture

this really fucks me up...he was hand placed by the "technocrats"....but he isnt playing ball.....did his heart grow three times bigger this day?...

stocktivity's picture

Wow!  Silver just took off (10 am).

GetZeeGold's picture



It's not adios.....it's aloha.


Cognitive Dissonance's picture

So long. Farewell.

Don't let the door hit you in the ass on the way out.

<Of course this means another (GS) tool will be quickly slipped into place.>

boh knows's picture

Prolonging the inveitable....

Zero Govt's picture

Yep, it's called pear-shaped economics... thin on the top (brains) and thick on counterfeit wealth patches

Dr. Engali's picture

I wonder which Goldman employee will be replacing him.

HD's picture

I hope it's Cramer. Gets him out of the US and I bet it will be entertaining to hear him kiss Ben and Timmy's ass in broken spanglish.

Dareconomics's picture


Spain Still Needs a Bailout

Spain Debt Sells Despite Bailout Pressure – WSJ.com.

Here is an example of the mainstream media’s reporting of the Eurocrisis:

Despite mounting pressure for it to seek an international bailout, the Spanish government proved it can still finance itself on markets.

No such thing happened. If you have been following the Eurocrisis, you know that Spain is not selling debt to disinterested third parties looking for a good investment. The debt is being sold almost exclusively to its own banks. It’s easy to sell debt when you have a captive market.

Spanish banks are essentially dead, but they are being propped up by the Bank of Spain’s Emergency Liquidity Assistance under the auspices of the ECB. Spain sells bonds to its banks who immediately pledge the bonds as collateral for cash to prop themselves up. This action is occurring in Greece, too.

Spain needs a bailout. There are no two ways around it. A country can finance a few billion here or there, but Spain needs at least €86bn to finance maturing debt and its budget deficit for the rest of the year.

Short-term investor exuberance and hope will forestall the crisis, but the math does not change. Spain needs too much money:



goldfish1's picture

Spain needs at least €86bn to finance maturing debt and its budget deficit for the rest of the year.

What's a hundred billion when we're talking derivitive fraud into the 500 trillions?

Dead Canary's picture

It's like "Night of the Living Spaniards". No matter how many times you hit it with a shovel:


Cognitive Dissonance's picture

A double tap to the chest and one in the head is how you take care of the living dead.

BurningFuld's picture

Best analogy I've read in a long time. Too funny!

trebuchet's picture

Heading into european close, algos lifting SPY on low vols....... 

.........will be funny to see how this play out

Beastmanager's picture

Why there is no tag for spain in ZH?

There is tag for portugal, greece, italy, france, germany...

A freudian trauma of Tyler Durden that engaged in a fistfight in Barcelona or lost his girlfriend to a spanish Don Juan?

youngman's picture

we can see the numbers....I wonder what THEY are seeing....and their Income projections have to be way off..less and less revenue as people go Gault...under the table..cash only...or broke...I know a politician has to try to keep the morale up...but at some point you have to tell the truth to make the right choices..this is a case study of group think....where no one wants to tell the truth...because it affects them personally...lose their job..vs going with the group...keep getting a pay check

gggunchi's picture

This "lul" in said EuroCrisis reminds me of late Jan -- May as the EuroBanks were burnings through 1T€.  


What "flashpoint" occurs to reignite it?