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Overnight Sentiment: Europe Is Open, Bankia Is Plunging And Spanish Bond Yields Are Soaring
The US may be closed today but Europe sure is open. And while the general sentiment may be one of modest optimism in light of four highly meaningless Greek polls which fluctuate with a ferocious error rate on a daily basis, now showing New Democracy in the lead (and soon to show something totally different - after all Syriza had a 4 point leads as recently as Friday according to one of the polls), pushing equity futures higher, Spain has so far failed to benefit from either this transitory spike in optimism driven by record number of EUR shorts forced to cover (more below), with its yields touching a fresh record overnight, the 10 year hitting 6.50% and 450 bps in the spread to bunds, while re-re-nationalized Bankia, now with explicit ECB support plunging nearly 30% only to make up some of the losses and trade down 20% at last check. An earlier 2 year bond auction out of Italy did not help: the country raised the maximum €3.5 billion in zero coupon bonds, however the OID was high enough to send the yield soaring to 4.037% average compared to 3.355% just a month ago, while the Bid to Cover dropped from 1.80 to 1.66. In summary: Europe is walking on the edge right now, and the only thing preventing it from imploding this morning is some short covering as well as a furious statement out of Germany, which has to understand that its precious ECB is now directly funding nationalized banks: something Merkel and BUBA's Weidmann have said in the past is dealbreaker.
How is the ECB funding Bankia directly? Here's how:
Spain may recapitalise Bankia with Spanish government bonds in return for shares in the bank which last week asked for rescue funding of €19bn, a government source has told Reuters.
Bankia could use the sovereign paper as collateral to get cash from the European Central Bank, forcing the ECB to get involved with restructuring Spain's banking sector, laid low by lending to property developers in a boom that ended in 2008.
The state takeover of its fourth-largest lender, Spain's biggest bank rescue, has intensified fears that the rising cost of helping banks may force the eurozone's fourth largest economy to seek an Irish-style international bailout.
The Economy Ministry declined to comment on the matter on Sunday. European Union authorities are expected to sign off plans to recapitalise Bankia in June.
The Bankia rescue will affect Spain's public debt to gross domestic product ratio and the deficit at a time when the country has implemented growth-stifling austerity measures aimed at bringing state debt down to Europe-agreed levels.
ECB policymakers, who have pumped more than €1 trillion (£802bn) into Europe's financial system in recent months, are resisting pressure to do more to shore up the eurozone.
"The biggest problem here is that the ECB could object. That's a legal issue, but technically it is possible," said Jose Carlos Diez, economist at Intermoney Valores.
Of course, with bond charts looking as follows, none of the above actually matters: Spain is well on its way to a full blown PSI (remember: long foreign law, short local law bonds, sooner the better as even more LCH margin hikes are likely imminent).
Spain can mask its bond nationalization however it wants, but the truth is that once the confidence in the banking system is ruined, a system which now will see similar runs occurring at other distressed banks as we demonstrated on Friday, things will go from bad to worse in a hurry. Here is how Deutsche Bank summarizes Spain's dead end:
Time is running out. Spain has appointed two independent auditors (Oliver Wyman and Roland Berger) to assess the value of the real-estate related assets that are going to be transferred to ad hoc ?“defeasance structures?” against an additional provisioning effort. The conclusions should be published by the end of June. However, even before this exercise is conducted the news flow on this matter is clearly negative. According to El Pais on Friday, Bankia?’s board will call for government support of EUR 15bn on top of the nearly EUR 5bn already injected. This is more than what the government was communicating on (less that EUR 10bn). The same newspaper reported that three credit institutions which had been taken over by the state, which were supposed to be adjudicated back to the private sector, will actually be consolidated in one single public entity together with Bankia. This would control a loan-book of EUR 281bn, some 27% of GDP. If confirmed, Spain would be on the road to a ?“bad bank by stealth?”, an option it had rejected so far.
Good luck with getting Germany to pretend like the ECB is not bailing out a quarter of Spanish GDP in the financial sector.
Finally, those relishing the recent move higher in futures on Greek "polls" (read our prediction how this is the only headline indicator that matters in Europe right now from a week prior), it may be time to book meager profits. From Reuters:
The euro recovered from two-year lows on Monday as Greek opinion polls showed parties that favour sticking with the country's international bailout deal gaining support, leading investors to cut some of the record bearish bets against the common currency.
Most investors were pessimistic over how long the rebound would last, however, with many fretting about the lack of growth in Europe, the fragile health of Spanish banks and rising borrowing costs for peripheral euro zone countries.
These concerns have dragged the euro 5 percent lower so far in May and left it on track for its worst monthly performance since September.
Greek opinion polls pointed to victory for the conservative New Democracy party in the June 17 election, making it more likely the next Greek government will stick to bailout terms agreed with the European Union and the International Monetary Fund, enabling Greece to stay in the euro.
These expectations saw the euro climb 0.6 percent to $1.2585 , off Friday's trough of $1.2495, its lowest level since July 2010. It hit a session high of $1.2625 as stop-loss orders above $1.2620 were triggered, but robust offers layered at $1.2630/50 will check gains, traders said.
Volumes were on the lower side due to a holiday in some parts of Europe, with the U.S. also shut for Memorial Day.
"Investors have got a bit exhausted selling the euro in the absence of more negative news," said John Hardy, currency strategist at Saxo Bank. "So we are seeing some consolidation after the euro's sharp drop from $1.33 to around $1.25."
Indeed, speculators bolstered their euro bearish bets to record highs in the week ended May 22, while dollar longs rose to the highest since at least mid-2008, leaving ample scope for a correction as they cut positions and book profits.
"Heading into the Greek elections we'll fluctuate a lot. Because the market is very, very short euro, reactions to any positive news may be bigger than those to negative news," said Mitul Kotecha of Credit Agricole Corporate and Investment Bank.
"That said, even if we get some good news from Greece, the weight of bad news elsewhere is likely to keep any bounce in the euro short-lived," he said.
"Short-lived", that is, at least until the next Eurosummit. Which will fix everything this time. We promise.
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Markets are open, like the first markets
Bankia is broken, like the first bank
Praise for the trading, praise for the morning,
Praise for the screaming, four letter words.
Piss funny.
Europe is broken.
The nations the compose it were not themselves broken when they were agglomerated into the EU. Funny huh? Was it all part of a plan to crash the world economy? Or was it a genuine effort that just got out of hand?
Tower of Babel. over and over and over again. people just never learn ....
"the 10 year hitting 6.50% and 450 bps in the spread to bunds"
Now THIS is how to report bond yields.
The finance ministry doesn't give a shit about bund spreads. The raw yield is how much money they have to come up with to service their issuance. And yes, there are those who think spreads to bunds are useful to know for their random walk -- err -- trading.
Regardless. Well done. Report both numbers and readers have better info.
I can almost hear Cat Stevens saying that.
'tis as it ever was....
I am getting tired of these 'armageddon weeks' can't we just get on with it?
On the brightside - the Greek stock market has bounced!!
Roll up roll up - Greek bulls get creamed tomorrow...
Some of Europe is actually quite closed for the Whit Monday (Pentecost Monday) religious holiday.
Worth reading on the Greek catastrophe for the people on the streets there - John Ward's 'The Slog' -
http://hat4uk.wordpress.com/2012/05/28/euroblown-greece-stops-dead-as-go...
Memo to the Germans:
1) First rule of Warfare: do not get into a military alliance with Italians or Spaniards.
2) First rule of Finance: do not get into a common currency with Italians or Spaniards.
i remember a case from a basque company going to do business with Germany... those guys refused and then guy ( founder) did it himself --- Car industry -pieces- and went back by car using thee piece
PD: he barely arrived though but German were so impressed that gave patent to him
Hey Europe, wake Up!!!!!
"...in light of four highly meaningless Greek polls which fluctuate with a ferocious error rate on a daily basis..."
Perhaps the Greeks have discovered that it's probably beneficial to lie to the pollsters since the information they get is simply used to manipulate them further? LIE TO THE POLLSTERS, it's fun and easy.
Europe is doomed....
I just returned from a trip to Europe which included London. Now, I know London how it was in the 70s and 80s. What you have now is multi cultural political correctnes gone mad. I stayed in a Hiton close to Edgeware road. There might have been 1 or 2 real brits working in the hotel. All the rest were from Poland, Italy, Ukraine or whereever. The drivers who took me from/to LHR were immigrans with limited english. In fact one even admitted that the 'whites' have all moved out of London. Except for the Queen of course. And I have the very strong feeling that the royal family still call ALL the shots. They and their banking system want the ponzi game to go on forever. Critical discussion of UK immigration is a big taboo. Their houses of parliament are just about as bogus as our 2 party system. Long story short, Europe as it has been for centuries is going down the tube.
Shut up you racist - can't you take a bit of labour competition?
Besides - people who take 'advice' from a private hire taxi driver are the 'biggest common idiot' there is.
The divide in this country is between RICH and POOR - not between races and colours.
Simpletons like you always go for the simplest answer to everything - possibly due to you limited attention span.
Guess what, I don't care one bit if some people like you call me racist, homophobe, whatever. Au contraire, it makes me sure that I am on to something. And yes, Britain has always been a white. With a lot of poor white and some rich white...until now at least. That your simplistic view of 'labor competition' is nothing more than an excuse for stealing jobs is quite telling.
"...The divide in this country is between RICH and POOR - not between races and colours." ...Classic re-direction technique. Take a problem and make it into something else. Oldest trick in the book....
@ The Count
I will try to define the core reasoning throughout your rather platitudinous post and I shall simplify it as much as possible.
Your rationale for Europe's demise, with emphasis on a portrayal of London's current state of affairs, pertains to the fact indicating:
As a result, according to your post, "Europe as it has been for centuries is going down the tube. "
To keep it short, I will assume that you are old, since you are mentioning a familiarity with London during the decades of 70s and 80s, when incidentally multiculturalism was less prevalent due to the yet to come flawed immigration policies of the Blair government, between 97-07.
That being said, multiculturalism should not constitute an issue, since it is the result of an open border policy within European boundaries.
The problematic aspect of this otherwise 'evolutional' social policy, is the lack of regulation of immigration waves throughout Europe, the lack of assimilation and equal integration between host cultures and visiting immigration groups, on a religious, cultural and overall social level.
While @writingsonthewall's above post can be described as somewhat oversimplified, it does carry a certain amount of credence, since the division between the two polar opposite social groups is more likely to be attributed as a cause of conflict, rather than the one of cultural clash, or perhaps racial difference, which might be subtly undertoned within your post.
As such, it would mean that you have not travelled in quite a long time, pay any sort of attention into political affairs, or simply chose to remain ignorant regarding the social issues of a politically interconnected continent with different cultures.
Because if you are from wherever you might be from, and rant about the majority of taxi drivers or hotel employees being not natives, then congratulations you have discovered the rest of the whole world. And yes - lower socioeconomic classes will migrate to more affluent metropolitan areas and they will indeed integrate themselves into the low wage working professions, shunned by the native middle class. Perhaps you might want to interact with a group of "real Brits" & "non-white" immigrants, from an upper class layer, and observe how they interact. Hint - effortlessly.
Regarding the political correctness, which is considered to be a taboo. Well - it really ain't, since if you scout even a fraction of the daily newspaper circulation you will need to try to not find an article debating the current issue.
The real problem is the equation of rampant and unregulated immigration, which more often than not -90%- consists of the lowest socioeconomic waves with their set of lower education, religious systems, national culturalism, etc., clashes with the equal "real Brit" lower socioeconomic denomination.
Hence the rising of the far-right English Defence League and their easily manipulated racist hordes, opposing the influence of one ridiculous theocratic system, to support their own equally ridiculous theocratic system, which apparently is been threatened with dilution along with the purity of their race and other various prides of the lowest classes.
So the core origins of what seems to you as a reason for Europe's disintegration, can or will also be the reason for the disintegration of the rest of the world, since as it was explained above, the middle classes who were once constituting a socioeconomic centre, were benefiting in a way which allowing them and their offsprings to enjoy a prosperous life, while heading towards an upwards trajectory on a social, educational and scientific level.
So, while the worldwide economic condition causes a financial decline for the continuously reduced middle classes, that are forced to be relegated to lower working classes, or worse, unemployed underclasses, the educational level for current and next generations faces declines as well, forcing the strengthening of national identities, theocentric cultures, decreased affluence and international liberalism, and ultimately leads to cultural clashes between ethnic groups who were once more likely to interact due to economic prosperity, which incidentally masked the many foundational flaws of the political administration policies regarding the lack of migration regulation.
So in essence, yes, the problem can eventually be traced to the root of social grouping, instead of cultural.
As for the Queen and its control over the criminal banking system, I won’t comment because it will need an exponentially longer post.
Also, you should travel more, and read - much more.
"...because it will need an exponentially longer post." ;-)
Scalaris, oh great one. All knowing and all understanding, I rest my case. Simply because a longer response will undoubtedly cause a muti page lecture, for which I have no time.
PS Also, you should travel more, and read - much more...
Pretty sure I have traveled much more than you :-)
"Pretty sure I have traveled much more than you.."
*performs a ceremonious bow*
so what. after the revolution, half of all cab drivers of Paris were Russians fleeing the bolsheviks. and the British political system based on the first-around-the-post is roughly the same as you have at home, and not what the rest of Europe has.
I could write a similar comment about my last visit to New York... yawn.
Funny what "whites" means for you, with exclusion of Poles, Italians and Ukrainians. I presume Germans are ok for you since the Queen is of mixed Saxon/Norman descent... and very perceptive from you to note "how the royal family calls all the shots", eh? tell us how you can tell...
Critical discussion of UK immigration is taboo? are you nuts? for all their faults, the Brits have an ongoing critical discussion on it since four decades. particularly about immigration from Pakistan & India.
"the Brits have an ongoing critical discussion on it since four decades. particularly about immigration from Pakistan & India." ....well, if there was such a discussion it obviously has gone nowhere. I understand totally whats going on in Britain. The bogus ponzi scheme of a finanacial system needs perpetual growth or it's bye bye time. Same system we have in the US of course. And the royal family plus high finance goons fully understand that without warm bodies being imported into the UK the jig is up. So, along with the MSM you have a mind fuck of immense proportions going on where personal rights in the UK have been chopped away (you cannot legally carry a knife around in public, totally forget about carrying a gun), cameras EVERYWHERE, Islamic Sharia has been partially legalized and if you dare speak up they will screw you 'royally' (pun intended). The UK proudly combines the worst of Europe and the worst of Amercia.
Scalaris has given you a very good answer that covers most of what I think.
In one we agree: "the UK proudly combines the worst of europe and the worst of America". Funnily, even if we draw the same sums, it's for completely different reasons.
Tell me, how exactly did you feel disadvantaged while non-carrying a weapon while being guest of one of the bigger metropolitan areas of the world? Where you robbed many times? By the way, did you know that not carrying weapons around was a custom on Bog Island before it became a law? And that the police was famous for not "packing heat"? Yes, the Police. Not. Armed.
And did you know that half of those cameras are private? Because, like in many parts of the US, you nearly can go through London never-ever passing through public spaces? And those artificial eyes are ogling you because you are on private grounds? And one third of the cameras is indeed put there by the police, but has the scope of checking number plates to see if you paid the day-ticket to drive in London?
I also have to wonder what the hell you did in Greater Babylondon that you got in trouble with Islamic Sharia law! I'm shocked! Did you promise marriage to Muslim Twins and now you want to get out by claiming you can't get both back to the US?
"...Tell me, how exactly did you feel disadvantaged while non-carrying a weapon while being guest of one of the bigger metropolitan areas of the world? Where you robbed many times? By the way, did you know that not carrying weapons around was a custom on Bog Island before it became a law? And that the police was famous for not "packing heat"? Yes, the Police. Not. Armed..."
Did you know that knife related crimes did NOT go down when the laws were first enacted. Upon which even sticter laws were drafted which probably did not do much either? Yes, I actually live in a county in which I can legally carry not only a pocket knife put also a real live automatic pistol. What a concept, an armed citizen! Do you know what the gun laws are like in Switzerland? No? Well, read up my friend. And let me guess which country, the UK or Switzerland has less violent crimes.....hmmmmm. So you go on being happy about not being able to do what truly free citiziens can do.
Financial collapse will never happen on an American holiday.
The day after...
*YAWN*
Wake me up when they draw blood
the blood has been drawn, they're just putting Bankia into a zombie stupour attached to State (ok taxpayer) drip-feeds
zombie banks attached to the zombie State and they're going to lead us out of Hell ..yeah right!
the tea-sipping 4 eyed retard, Mervyn King Chief at the Bank of England, said only last week he's "looking for a path back to normality" . This inane stupifying comment reveals 3 things:
1. He doesn't have an answer yet.
2. for 4 years into the crisis he hasn't had an answer and what he has done clearly hasn't resolved the issues (ie. has not worked)
3. This is the most senior banker in Britain.. and he's totally clueless as must be the entire Board of the Bank of England
Last one out of Britain switch the lights out. Thank you sooo much
Lookin good
nothing like the sight of banks being nationalised (Britain, Spain, Belgium, Germany, America, Japan, right across Europe) to make you wonder precisely what the productive output is of the financial geniuses that attend Davos in Switzerland
Communist USSR coming to an ATM near you, brilliant Comrade Banker
Japanese Commercial:
http://www.youtube.com/watch?v=q43K1FVWR18&feature=related
Another one:
http://www.youtube.com/watch?v=zTKr9NyUNjg
Well, the TPTB have managed to have 18 Summits over two years and drag "The Collapse" to its present situation of "Status Quo" = nothing fixed and nothing has changed.
The word is the next summit (just after the June 17 Greek elections) will fix every thing. The first three major items on the "Official Agenda" are: 1) What is the seating arrangement around the conference table, 2) What is for lunch, 3) When is a convenient time for the next Summit.
It appears to me the future is all sweetness and roses for the EU - what could possibly go wrong wken you have leaders that "really care"?
...doing GOD's work...GS-DickingDaMuppets
It is the time to invest in the Indian markets http://sandyyadav.com/
After Mme Lagarde dropped the gloves and went on Greece Tie-Domi-style (see her interview with the Guardian) it's rather obvious that the upcoming re-elections in Greece are some sort of non-event. I can't imagine that the Troika is willing to re-negotiate the Greek bailout. There might be some growth programme by the EU financed by hidden debt but if the Troika gives in to the new Greek government, some governments in northern Europe will certainly have a problem explaining this to their voters.
I digress..We have the Leveson media inquiry at the moment with that snake oil salesman Tony Bliar currently giving "evidence". All the evidence was kindly given by an intruder who promptly reminded everyone of Bliar's giift from JP Morgan for supporting the Iraq war and calling him a war criminal.. He mumbled something in his defense.. Someone please string him up..
yields are soaring; that's soo good, for the investors anyways, as long as ECB pays...as back stop.
http://www.bbc.co.uk/news/uk-18234953
I wonder what “defeasance structures” are. Some kind of buildings? Spanish castles (hur hur)? Is the Finance Ministry HQ a defeasance structure?
At least Greece improved!!
http://confoundedinterest.wordpress.com/2012/05/28/another-day-on-the-med-greece-improves-spain-and-bankia-slide/
Socialist fart gas is the wind beneath my wings ! Monedas 1929 Comedy Jihad I'm Flying To Never Never Land