Overnight Summary: Perfect Storm Rising

Tyler Durden's picture

The only good news spin this morning was that the Greek, pardon Spanish contagion, has not reached Italy, after the boot-shaped country sold €5.25 in bonds this morning at rates that did not indicate a meltdown just yet. It sold its three-year benchmark at an average 3.91 percent yield, the highest since January but below market levels of around 4 percent at the time of the auction. It also sold three lines due in 2020, 2022 and 2025 which it has stopped issuing on a regular basis. And this was the good news. The bad news was the not only has the Spanish contagion reached, well, Spain, but that everything else is now coming unglued, as confirmed first and foremost by the US 10 Year which just hit a new 2012 low of 1.777%. Spain also is getting hammered with CDS hitting a record wide of 526 bps overnight, and its 10 Year hitting 6.26% after the country sold 364 and 518-Day Bills at rates much higher rates than on April 17 (2.985% vs 2.623%, and 3.302% vs 3.11%). But the highlight of the day was the Banco de Espana release of the Spanish bank borrowings from the ECB, which to nobody's surprise soared by €36 billion in one month to €263.5 billion, more than doubling in 2012 from the €119 billion at December 31.

That this happened even as the Spanish government is now serially nationalizing banks is probably the nail in the coffin of Spain, and means the market can now sit back and watch as the Greek events unfold one at a time a few thousand kilometers west. Finally, and going back to Greece, nothing has been resolved on the election front where Syriza has pointedly refused to meet with the president at 7:30 pm local time in a last ditch attempt to avoid a second parliamentary election. But probably the one headline that bears the most watching is that Greek government spokesman Kaspsi has said that the Greek government has not taken a decision on its May 15 bonds yet. Well, with just a few hours left in the day, they better decide soon. As a reminder, this is the fulcrum issue identified first by Zero Hedge, that is a non-member of the PSI consortium and has non-Greek law covenants, and whose non-payment will push Greece into full out bankruptcy.

Altogether a perfect storm day in the making, which has sent the EURUSD tumbling, gold red on the year, various "safehaven" bonds to new record low yields, and futures imploding in what is now certainly a preparation day for THE NEW QETM, especially since German GDP data released tomorrow now appears set to confirm that even Europe's largest economy has double dipped. With China already commencing a new easing episode, it only means it is just a matter of time before the Fed now joins the rest of the world in a desperate attempt to once again prove Einstein was 100% correct.

And a full recap from Bank of Countrywide Lynch:

Market action: Political uncertainty undercuts confidence

Political uncertainty in Europe is undercutting global investor confidence. In Greece, deadlock is set to continue as legislators are unable to find agreement on a unity government. Meanwhile, the Greek media has started discussing Euro exit scenarios and the threats to the nation's banking sector. Meanwhile, in Germany, Chancellor Angela Merkel suffered a significant political setback; her party was defeated in the nation's most populous state in regional elections. 

In other news, weaker than expected Chinese economic data has spurned action. Clearly, the pace of the slowdown in China is more than policymakers can stomach. The People's Bank of China (PBoC) said that it is cutting the reserve ratio by 50bps, freeing up more cash for the banking system. This is the third such cut in the last six months. Announced over the weekend, the cut will be effective May 18. Because the announcement came immediately after soft economic data, we expect the PBoC to further ease liquidity conditions. 

Stocks down, US and German bonds better bid

Stocks are selling off sharply as investors take risk off the table. The MSCI Asia Pacific Index slid 0.7%. In Europe, major indices are down in excess of 2%. Spain's IBEX is off 2.8%; the CAC 40 is cracking 2.3%; and, the German DAX is sliding 2.1%. At home, equity futures are pointing to a lower open across the major indices. The Dow is set for a triple-digit loss at the open. 

In bondland, there is a major flight to safety trade. US 10-year Treasury note yields are down 6bps to 1.78%. If you think that is low, the benchmark German bund is off 7bps to 1.44%. In the UK, gilts are down 10bps to 1.87%. By contrast, yields across the periphery have blown out, up 23bps in Italy to 5.7% and 28bps in Spain to 6.24% - levels not seen since last November. 

Commodities melt as US dollar rallies

Not surprisingly, as the market prices in a softer growth backdrop commodities are coming under pressure. WTI crude oil is down $2.0 to $94 per barrel. Turn to page C1 of today's Wall Street Journal, "Commodities Rally Hits a Speed Bump." The yellow metal is having a bad day - of $17 to $1563 per ounce. Part of the weakness in gold has to do with the falling value of India's rupee. Recall that India is the world's largest gold consumer. See page C10 of today's WSJ, "Weak Rupee Stings Gold." Industrial metals are down too. Copper is taking a 2.5% hit to its lowest level since January. Finally, the US Dollar is enjoying the risk-off trade, rallying against most major currencies. The DXY Index is up 0.3% and with concerns rising in Europe, the euro-dollar cross is breaking down to 1.29. 

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Banksters's picture

The poor poor 401k crowd is going to get FUCKED.   FUCKED I SAY.

Aziz's picture

Spanish banks?

Spare a thought for RBS customers whose accounts were transferred to Santander by the British government. Out of the frying pan into the fire. They seem absolutely determined to have British banking customers lose their savings.

WestVillageIdiot's picture

Whatever happened to Northern Rock?  People have forgotten how close the brick wall was in 2008.  And nothing has been fixed.  ZHers know this.  Our fellow humans, not so much.

GetZeeGold's picture



See.....this is why I waited. The python is gonna put up one hell of a fight before he dies.



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Come on Ben Shalom.......jamb the metals down harder for me. It's the last plan in the playbook. Nothing to see here.....move along.


navy62802's picture

People who have followed conventional advice are going to find themselves in the poor house, allong with the traditional advisors.

Sudden Debt's picture



insanelysane's picture

Yes, the beautiful people just need to have a dinner or 2 at 40k/person and help the Greeks out.  Free Greece!  Well actually they would be helping out the stupid bastards that loaned money to the Greeks.

WestVillageIdiot's picture

Greece, like all countries, just needs more government.  That is the solution to all of these problems.  Just ask O and all of the other big government zealots that dominate all Western nations. 

Smaller governments will mean the end of the world.  Just ask them.

Dermasolarapaterraphatrima's picture

Foreign aid might be defined as a transfer of money from poor people in rich countries to rich people in poor countries.

--Douglas Casey, Classmate of Bill Clinton at Georgetown University

smb12321's picture

Clooney is too busy lecturing Americans on the demise of the middle class from his third home in Monaco. What an irritating snit!

q99x2's picture

They need to quit their jobs and get their money out. I'd quit their job for them if I could.

mammoth mo's picture

2 hours and 15 minutes to make some serious lies up.


Sudden Debt's picture

My dog pissed on the futures sir!

Sudden Debt's picture

And than my hamster raped your dog!

what a sight....

all youtube stuff...

Sudden Debt's picture

This must be a mistake, I pay my bills every month on time. Please go away, WHAT WILL THE NEIGHBOUR SAY?!!



WestVillageIdiot's picture

I'm looking out the window and I just saw a flock of unicorns land on the roof of the Goldman building.  Something was dropping from their rear-ends.  I thought they might be Skittles but they were actually Krugerrands.

We should be safe, now.

a growing concern's picture

Feel free to have them fly by my house.  I'll grab my bucket.

Sudden Debt's picture

I'm good for it dude! Bernanke is my shower budy!

Fips_OnTheSpot's picture

Einstein? About stupidity?


Please proceed then.

WestVillageIdiot's picture

I believe the reference was to insanity being the act of doing the same thing over and over again but expecting different results.

Kayman's picture

Actually, Quantum Mechanics says just that.  Results may vary.

Sudden Debt's picture

As Einstein would say:   



insanelysane's picture

The FED and Global Banksters believe Einstein said E = MC^2, where E = Economy; M = Money Supply; C = Printing at the speed of light.  Unfortunately, printing money at the speed of light is how to create a black hole.

WestVillageIdiot's picture

Why did you have to bring Oprah into this discussion?

Sudden Debt's picture

She did lose 500 pounds after her "austerity measures"...


navy62802's picture

US 10 Yr down below 1.8%, 30 Yr below 3%.

WestVillageIdiot's picture

Take away the easy bond profits of the past 3 years and all of the banks are gone. 

Something tells me that this free bond money that the financial institutions have been raking in since 2009 has made both the bond world and the banking world much more dangerous. 



smb12321's picture

So once again buying treasuries yields a negative return.   Maybe we can do what the EU is doing -printing money for banks on the proviso they buy debt so the Fed can print some more to give to banks (continue on hamster wheel),

Poor Grogman's picture


Form a committee,

No wait, ask the IMF for help,

No wait lets have a summit of finance ministers.

Oh to hell with it, lets just all go Greek...


Bend's picture

"Only two things are infinite, the universe and human stupidity, and I’m not sure about the former."

Ethics Gradient's picture
Insanity: doing the same thing over and over again and expecting different results.
bingo was his name's picture

“Insanity is doing the same thing, over and over again, but expecting different results.”
? Albert Einstein

ThirdWorldDude's picture

"We can't solve problems by using the same kind of thinking we used when we created them".

WestVillageIdiot's picture

That is bullshit.  I, sir, take offense at that quotation.  Of course we can solve a problem of excessive debt with more debt.  Next you will have the audacity to tell me that Paul Krugman is not the greatest economic thinker of all time.

We just have to keep believing.  Credit creation willl save us.  We just have to stay the course and it will all work out well.

AnAnonymous's picture

Of course we can solve a problem of excessive debt with more debt


Framing. Who says that adding more debt is done to solve a problemof excessive debt?
Mere diversion from the US citizen course
US citizens are simply maxing out the credit cards in a finite world where the repayment of the physical debt, following the space colonization fiasco, has to be doubted.

As US citizens do not speak of what they do, they can easily come up with strawsmen like going deeper into debt in order to repay an excessive debt.

Kayman's picture

Nothing like a Chicom lecturing on debt. Good luck on that money printing thingy.

mammoth mo's picture

All night long - they chased the dragon.

But when the morning came - this time the dragon was free

And chased those that had chased him

And brought his vengence down terribly.




ChrisDG74's picture

Meh. Some "unnamed source" will float a QE-3 rumor, right around 10am Eastern.

Then, to the moon Alice!

WestVillageIdiot's picture

Liesman or Pisani?

Who is the Waterboy du Jour?

trampstamp's picture

True, but even that is becoming less impactful every time they say a new QE is coming. The sheep now sheering the banksters


WestVillageIdiot's picture

It all worked in 2008 until it didn't.  As soon as the Olympic games were over the party ended.  And look at where we are at today. 

HAL 9000's picture

Just a moment...just a moment...I've just picked up a fault in the AE-35 unit. It's going to go a hundred percent failure within 72 hours.

lizzy36's picture

Remember how for 2 years now Greece "doesn't matter" has been the Mantra.

Turns out it may actually matter....what were the odds.

WestVillageIdiot's picture

"Subprime is contained"

I love to reminisce about 2007.  Look how well that one turned out. 

goldenbuddha454's picture

The wheels are coming off the bus and Germany is standing first in line at the exit.   Greece is driving the bus.  They say, 'get off now if you want to, but just remember we're going 180km/per hour so hopefully you can handle that landing, 400 Billion worth!'. 

rebelscum1967's picture

looks like nuttin' but air under 1340ish...they will pump to oblivion before we dip even 1%. China easing...bear trap? I lost my foot in the last one.

Snakeeyes's picture

Both Greek and Spanish Sov yields spiked. US Treasury futures on 10 yr highest on record.

How's that Spanish housing bubble working out for you?