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Overnight Sentiment: Now, It's Italy's Turn (As Spain Continues To Break All Records)
... Which is not to say that the other usual suspects are fine, they aren't: Spain's 10 year just hit a record 6.72%, a spike of nearly 30 bps on the day, and just shy of the apocalyptic 7.00%, at which point everyone will quietly move to the bomb shelter (and JPM is not helping things, saying the total Spanish bank bailout may hit €350 billion even as the Spanish bailout fund has just €4 billion left in it...), even as the 2 Year rises above 5% for the first time since December 2011 on some rapid curve inversion moves. No: today the market simply had one of those epiphanies where it sat in front of a map, and finally remembered that last year as part of the continental contagion spread that forced the November 30 coordinated global central bank intervention, Italy was at the forefront. Sure enough, 2011 is once again becoming 2012. Today's catalyst was an Italian sale of €5.73 billion in 5 and 10 year bonds, less than the maximum €6.25, where €3.391 billion of the 5 Year was sold at a 5.66% yield, compared to 4.86% on April 27, and the BTC of 1.35 vs 1.34. But the optical killer was the €2.341 billion in 10 Years which priced above 6% for the first time in a long while, coming at 6.03% compared to 5.84% in April, and a dropping BTC of 1.40 compared to 1.48 before. The result is a blow out in the entire Italian curve, with the 10 Year point widening by 28 bps, and sending Italian CDS wider by 21 bps to 543 bps. In other words: welcome to the party Italy. You have been missed.
Some perspectives on the first of many ugly Italian bond auctions:
MICHAEL LEISTER, RATE STRATEGIST, DZ BANK, FRANKFURT
"Those figures are really unconvincing. The 10-year benchmark has been issued (at a price) below secondary levels and the bid/cover for the new bond doesn't look too strong. All these on the back of quite a concession into the auction.
"The auction doesn't provide any arguments to become bullish on peripherals again. We're seeing Italy being taken hostage by the Spanish concerns. The market does not discriminate anymore, it is either 'risk on' or 'risk off', you either buy periphery as a whole or you sell it.
"The market isn't happy with this auction."
PETER CHATWELL, RATE STRATEGIST, CREDIT AGRICOLE, LONDON
"The market appears disappointed by the Italian auctions, in that the 10-year came above 6 percent in yield and the new 5-year gave up a lot of yield in the grey market ahead of the auction. The deterioration of peripheral markets appears to be accelerating, which is mainly a function of stress stemming from Spain's banking sector and the Greek exit risks (i.e. market contagion effect), highlighting that the peripheral markets are in dysfunctional territory, raising the risk that peripheral sovereigns lose market access without intervention from policymakers."
MARC OSTWALD, STRATEGIST, MONUMENT SECURITIES, LONDON
"The levels at which the yields were struck were actually higher than the levels on the bid side in the secondary markets. The market had built in a big concession for it and the actual bidding... the prices which they had to strike at the sale had to have an even bigger concession and that's not good."
"With all the noises going on around at the moment, it's really rather unsurprising."
ALESSANDRO GIANSANTI, RATE STRATEGIST, ING, AMSTERDAM
"There was a huge concession before the auction and even despite that both bonds came out with a weak price, below the market. The "risk off" we have seen in markets is affecting especially Spain, but also Italy. Yields and spreads are back to January levels and the indications are the market is going back to the danger zone."
* * *
Other news did not help: European confidence plunged to 90.6 vs. estimates of 91.9, and down from 92.9. European M3 dropped to just 2.5% from 3.1%, while private loans grew just 0.3% vs 0.6% in March, which RBC's James Ashley called "unequivocally a disappointing report in all key areas", and which for all Austrian theory of money folks out there means just one thing: more printing is coming.
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But, but, but . . . Pisani always seems to feel so bullish and convinced that everythinbg is already priced in and that "stocks are cheap".
I'm telling you, it's those evil speculators who are spoiling everything...
If only they would force ALL saving deposits in the EU into those bonds all would be fine... for a few weeks at least...
Democracy only works at the end of a whip these days... or at the end of a barrel...
Bloomberg TV to muppets this morning, "Retail investors are missing out on great value....." Apparently something isn't priced in?
The retail sucker buying into the market too late to save the investment banks, hedge funds, and the wealthy from the losses they are about to see is not currently priced in.
well, if the retail invester won't cooperate this time, then they will just have to direct Ben to unleash QE3 to teach them a lesson ...
the 'dumb money' is NEVER allowed to 'win', and this time will be no different.
Agreed. Economic Facism until the middle class is wiped out.
waiting for the bullish rumor mill to get cranked up full tilt, we'll finish the day in the green on rumors of martians accepting spanish government debt as collateral from bankia. If the ECB wont take it the central bank of Mars will.
Look at everything turn right around. Amazing. Green open.
Spexit
Then Itexit, then Portexit, Then Irexit, Then Frexit... The Europocalypse
Does Corexit work on debt spills?
ok, so what's the problem? if the fund still has €4B, they can just leverage it up 100 times, bail out the banks, and have €50B left over ...
you keep thinking like that and there might just be a job for you at JPM
psssh.
Amateurs peddle money and debt and see it as the goal--the objective of the game. The pros deal with hopes and dreams. You control enough peoples' desires and ambitions and there's no amount of money or debt that can ever equal that.
Money is "tradition."
People are the real currency.
good interview spain is a weak antelope, its hunting time...
RT talks to political risk consultant Dr. John Hulsman
http://youtu.be/of4fmmRZ6z8
How is it possible that the European Union allows the weak states to enter the international money market and borrow the money they need without help – based on their own potentials? How is it possible that the “chain” of interests of euro can let its weak “links” exposed to outside pressures? How is it possible for a “herd” with common interests to let each “ship” defend itself against the wolves, without help, and its general security threatened? How is it possible for Greece, which represents a minor 3% of the Eurozone’s economy, to be allowed to threaten the other 97% of that economy, due to the latter’s weakness?
The European Union should be the one borrowing from the national banking system – thus dealing with profiteers itself based on its overall potential – not its weak “links” alone. The latter should be under the EU’s protection and constant monitoring. They should borrow from it at a subsequent time and if they became victims of profiteering, the problem should be kept in the bosom of the euro. Domestic profiteering should bring profits to Europe’s influentials, therefore bring profits in the euro area, and not threaten it.
From the Wall Street Crash of 1929 to the Global Financial Crisis of 2007
www.eamb-ydrohoos.blogspot.com/2010/02/ten-plagues-of-pharaoh.html
Authored by Panagiotis Traianou
a "crisis of confidence" in public finance is approaching New York like Chester Nimitz's Navy approached Tokyo Bay. "these things don't go away any faster" either. the euro must massively decline in value in order to maintain the "functionality" of the balance of payments system in the euro-zone. in short "they must flood the system with money." the chaos should be manageable in the sense that the gasoline shortages, the work stoppages and the outright loss of all the benefit checks (among many other things of course) need not necessarily lead to the collapse of governing authority itself. obviously the collapse of one government after another in the euro-zone however is indicative of a calamity of truly dramatic proportions. "willful blindness" (or "willful blinding by the media") is the order of the day on this side of the pond. ENJOY YOUR FACEBOOK EFFECT!
Round 3
Italy will be Europes newest punching bag.
Germany versus Greece - Germany - KO
Germany vesus Spain - Germany TKO
Germany versus Italy - ?
Greece and Spain KO'ed?! -- I think there are a lot more blows and bleeding yet to happen ...
Paella 570 - Pizza 530
...but Italy doesn't give up and is still fighting:
"Italy to increase excise duty on petrol to fund aid for earthquake"The EQ's in Italy were man-made: there's a large fracking operation going on in that same area as Big Oil is drilling for natural gas. http://www.youtube.com/watch?v=P7KNN8qYjDA&feature=g-all-u
Are those experts and analysts really surprised that Spain and Italy who have issued so much debt maturing within the three year LTRO window have problems issuing bonds maturing outisde the LTRO window?!
C'est ridicule!
As the USS Federprise approaches the Straits of Gibraltar:
Capt. Bernanke: "All hands to batlle stations."
Klaxon horns sounding.
"Print, Print, Print"
They denied gravity for 700 years. This isn't going to take long.