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

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Tue, 09/18/2012 - 10:11 | 2806796 SmoothCoolSmoke
SmoothCoolSmoke's picture

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

Tue, 09/18/2012 - 10:16 | 2806813 Dead Canary
Dead Canary's picture


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


Tue, 09/18/2012 - 10:19 | 2806832 GetZeeGold
GetZeeGold's picture



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


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


Tue, 09/18/2012 - 13:07 | 2807536 smlbizman
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?...

Tue, 09/18/2012 - 10:16 | 2806816 stocktivity
stocktivity's picture

Wow!  Silver just took off (10 am).

Tue, 09/18/2012 - 10:17 | 2806823 GetZeeGold
GetZeeGold's picture



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


Tue, 09/18/2012 - 10:16 | 2806804 Cognitive Dissonance
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.>

Tue, 09/18/2012 - 10:16 | 2806815 boh knows
boh knows's picture

Prolonging the inveitable....

Tue, 09/18/2012 - 15:51 | 2808289 Zero Govt
Zero Govt's picture

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

Tue, 09/18/2012 - 10:16 | 2806819 Dr. Engali
Dr. Engali's picture

I wonder which Goldman employee will be replacing him.

Tue, 09/18/2012 - 10:38 | 2806899 HD
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.

Tue, 09/18/2012 - 10:17 | 2806824 Dareconomics
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:



Tue, 09/18/2012 - 10:21 | 2806843 goldfish1
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?

Tue, 09/18/2012 - 10:24 | 2806854 Dead Canary
Dead Canary's picture

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


Tue, 09/18/2012 - 10:37 | 2806895 Cognitive Dissonance
Cognitive Dissonance's picture

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

Tue, 09/18/2012 - 10:38 | 2806900 BurningFuld
BurningFuld's picture

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

Tue, 09/18/2012 - 11:04 | 2807003 trebuchet
trebuchet's picture

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

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

Tue, 09/18/2012 - 10:57 | 2806981 Beastmanager
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?

Tue, 09/18/2012 - 11:00 | 2806994 youngman
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

Wed, 09/19/2012 - 04:03 | 2810068 gggunchi
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?  

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