The Overnight pEURonoia Is Back - Previewing This Week's Extensive European Bond Auctions

Tyler Durden's picture

European bond markets appear poised on the edge of the latest precipice as economic data this morning has confirmed once again that all the ECB's $1.3 trillion liquidity injection did was mask the underlying solvency issues for less than 4 months. Net result: more liquidity injections imminent (and with $2.5 trillion in asset sales and deleveraging still pending, we should probably bold and underling more). Yet what some are forgetting is that European banks would want nothing more than getting Spanish bonds back to 7.50%, the bogey which JPM defined as the level at which the NEW LTRO will be unleashed, standards of living be damned. The junkies need their fix and will do anything to get it, even crashing sovereign bond markets in the process. They may get their wish sooner than most expect: after all, this week is chock full of bond auctions in the core and periphery, where just one failure will make every forced buyer into a forced seller, as creative destruction will be the only thing to force the ECB's hand into injecting another several hundred billion in stock steroids, now that the Fed is still in its pre-presidential election quiet period. 

Marc Ostwald of Monument, via Bloomberg, summarizes the pitfalls in the next 168 hours:

  • Italian auctions this week will require ‘hefty concessions’ while the new 30-yr bund auction will need substantial foreign demand given its unappetitizing yield, Marc Ostwald, strategist at Monument Securities, writes in note.
  • Cites weekend collapse in Netherlands budget talks, highly inconclusive first round of French presidential elections and sluggish PMIs out of China
  • French election results highlight an extension of the Balkanization of western Europe and deep-seated disenhancement with modern politicians
  • A grand coalition of CDU and SPD is high probability in Germany’s 2013 federal elections which would push the euro zone closer to complete disintegration; increasingly unbridgeable gap between German and French visions of the region
  • Italy’s auctions of bills, 2-yr CTZ/BTPei and BTP/CCTs this wk will require hefty concession
  • New 30-yr bund auction will need substantial foreign demand to be successful as there is little natural/structural demand domestically while current 30-yr yield of 2.38% is wholly unappetitizing

And visually:

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GetZeeGold's picture

 

 

Mmmmm.......Euro bonds! How many you got for sell?

 

bank guy in Brussels's picture

Or Mario Draghi and Ben Bernanke on the phone arranging a new swap line to buy bonds

LongSoupLine's picture

Or Mario Draghi and Ben Bernanke on the phone arranging a new swap line to buy bonds

 

Or Mario Draghi and Ben Bernanke on the phone (via Goldman conference call) arranging a new swap line to buy bonds.

 

(added important detail.)

Thomas's picture

Christine Lagarde may need to break out that big, brown purse again.

Peter Pan's picture

Just a relapse until the next fake cash injection. Remember that the big boys make good money when volatility is at its highest.

battle axe's picture

When the hell is  the Bundesbank  going to come out and say enough? Any time now.....

Arnold Ziffel's picture

I'm stuffed with the 3000% yield greek bonds...I can't buy any more of these....sorry.

Ted Baker's picture

SOCIAL UNREST IN EUROPE IS COMING BACK AND IT WILL START IN MADRID SPAIN WHICH OVER TIME WILL LEAD TO POTENTIAL CIVIL WARS AMONG DIFFERENT EUROPEAN NATIONS....

GetZeeGold's picture

 

 

You're in charge Ted.....just handle it.

 

LongSoupLine's picture

Ted,

You need to buy a new keyboard since you can't seem to fix that 'Caps Lock' issue.

Rock the Casbah's picture

OT - Hussman mentions ZH in his weekly market comment.

Sudden Debt's picture

It"s William Banzai's fault... his funny pictures attackt even the biggest morons... but I don't think he read the articles.

 

Sudden Debt's picture

1.3 trillion for 4 months....

AND WHAT DO I GET FOR 12 MONTHS?! CUT ME A DEAL HERE BRO! I'LL GIVE YOU SPAIN AND GREECE ON A PLATTER!

 

Dr. Engali's picture

The heroin demands are gonna come faster , and they ate going to need bigger injections.

SheepDog-One's picture

So Yurp is 'bad' again now.

insanelysane's picture

I am not a Ron Paul guy but he is on CNBC this morning and they don't know what to do with him.  It is like he is speaking a foreign language to them.

Dr. Engali's picture

That's because the only thing they understand is fiat good , gold bad. They can't grasp the fact that more debt isn't going to cure a debt problem. In their linear thinking the only thing that will solve the problem is growth.

SilverTree's picture

Ill bet quite a few of the people at CNBC and MSLSD own physical, they will never admit it. 

unrulian's picture

Yea right...maybe a watch and earrings

GMadScientist's picture

You use the term "creative destruction" as if you have no concept of what it means.

 

Peter Pan's picture

I don't think it should be called pEUronoia. I think it should be just straight pnEUmonia.