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Overnight Summary: Perfect Storm Rising
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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The poor poor 401k crowd is going to get FUCKED. FUCKED I SAY.
Kersplat.
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.
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.
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.
People who have followed conventional advice are going to find themselves in the poor house, allong with the traditional advisors.
GEORGE CLOONEY TO THE RESCUE!
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.
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.
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
Clooney is too busy lecturing Americans on the demise of the middle class from his third home in Monaco. What an irritating snit!
They need to quit their jobs and get their money out. I'd quit their job for them if I could.
2 hours and 15 minutes to make some serious lies up.
My dog pissed on the futures sir!
My dog ate your dog, sir.
And than my hamster raped your dog!
what a sight....
all youtube stuff...
This must be a mistake, I pay my bills every month on time. Please go away, WHAT WILL THE NEIGHBOUR SAY?!!
IT AIN'T NO JOKE IF YOU DON'T PAY THAT NOTE!
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.
Feel free to have them fly by my house. I'll grab my bucket.
I'm good for it dude! Bernanke is my shower budy!
Einstein? About stupidity?
Please proceed then.
I believe the reference was to insanity being the act of doing the same thing over and over again but expecting different results.
Actually, Quantum Mechanics says just that. Results may vary.
As Einstein would say:
DEBT = DOWNPAYMENTS X INTEREST²
NUKE'M!!!!
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.
Why did you have to bring Oprah into this discussion?
She did lose 500 pounds after her "austerity measures"...
US 10 Yr down below 1.8%, 30 Yr below 3%.
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.
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),
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...
"Only two things are infinite, the universe and human stupidity, and I’m not sure about the former."
“Insanity is doing the same thing, over and over again, but expecting different results.”
? Albert Einstein
"We can't solve problems by using the same kind of thinking we used when we created them".
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.
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.
Nothing like a Chicom lecturing on debt. Good luck on that money printing thingy.
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.
Banzai!
Meh. Some "unnamed source" will float a QE-3 rumor, right around 10am Eastern.
Then, to the moon Alice!
Liesman or Pisani?
Who is the Waterboy du Jour?
True, but even that is becoming less impactful every time they say a new QE is coming. The sheep now sheering the banksters
Comical
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.
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.
Remember how for 2 years now Greece "doesn't matter" has been the Mantra.
Turns out it may actually matter....what were the odds.
"Subprime is contained"
I love to reminisce about 2007. Look how well that one turned out.
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!'.
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.
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?
http://confoundedinterest.wordpress.com/2012/05/14/med-uncertainty-greek-and-spanish-yields-spike-10-yr-us-treasury-futures-highest-on-record/
1987, 1999, 2008
I'm about to get pounded yet again. Sing it Bobby.....
http://youtu.be/yHFDa9efCQU
That was soooooooooooo 1987.
Just spoke to the Chief - "Heap um big trouble comin'".
Absolute and total currency debasement beyond all belief - margin call on bonds = sell gold to meet margin call.
This will not end well.
"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."
The question should be is who rigged the sale? Answer... the usual suspects.
"Part of the weakness in gold has to do with the falling value of India's rupee."
That's a new one. Could someone please post a link to a story that said that we should all buy gold because the rupee was getting stronger?