This page has been archived and commenting is disabled.

Iberia Implodes To 17 Year Lows As Stigma Trade +200%

Tyler Durden's picture




 

Europe's story today was multi-month record deterioration in equity and credit markets. The turning point appears to have been the market's recognition of what LTRO really is and LTRO2 pretty much marked the top. While recent weakness has been exaggerated by the JPMorgan debacle (contagion to 'cheaper' hedge indices in credit), the Greek reality and clear contagion of a Euro / No-Euro decision any minute has Spanish, Italian, and Portuguese equity and credit markets crashing lower (from already Tilson-clutching lows). Spanish bond spreads are 160bps wider since LTRO2 and Italy 87bps wider with today's +28bps in Spain taking it to all-time record wides (pay less attention to yields now as they will be flattered by the ripfest run to safety in bunds), Portugal is back above 1100bps in 5Y CDS, but most critically - given LTRO's unintended consequence of encumbering the weakest banks exponentially to the domestic sovereign - the LTRO Stigma is up more than 200% from its lows when we first pointed out the reality. Banks who took LTRO exposure are on average almost at record wides (with many of them already at record wides). European equities are weak broadly but remain above their credit-implied levels as investment grade and high-yield credit in Europe falls back to four-month lows (almost entirely eradicating the year's gains) while the narrower Euro Stoxx 50 equity index is down significantly YTD. short- and medium-term EUR-USD basis swaps are deteriorating rapidly once again as clearly funding is becoming a major issue in the Euro-zone.

Portugal's Stock index back to 1996 levels (as bonds near all-time wides)...

Spanish Bond spreads broke last year's wides and are back to their worst levels since pre-Euro in 1995...

European sovereigns are starting to accelerate wider - especially Italy and Spain...

and European credit (IG and HY) are underperforming stocks...

 

But digging into the details, financials are plagued with any bank facing the LTRO extremely weak - as LTRO Stigma is more than a triple off its lows and heading to record wides...

And with all the fungibility questio0ns and lack of trust, EUR_USD basis swaps are at 4 month lows indicating funding pressures picking up rapidly once again...

 

Chart: Bloomberg

 


 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 05/14/2012 - 12:45 | 2424129 The trend is yo...
The trend is your friend's picture

Thats ok  the late day push above 1350 is still coming

Mon, 05/14/2012 - 12:50 | 2424156 Clueless Economist
Clueless Economist's picture

...and in US, stocks rally/recover.  I can see sweet little Maria Bartoromo purring through her sweet lips and Botox-Ravaged face, "Stocks down today, but WELL of their lows for the day"  All is well

Mon, 05/14/2012 - 13:44 | 2424313 Vergeltung
Vergeltung's picture

she's a beautiful woman, man. not sure what your complaint could be. I find her to be extremely alluring.

Mon, 05/14/2012 - 14:30 | 2424467 Bam_Man
Bam_Man's picture

She apparently uses a hand trowel to apply her make-up these days and the result is she looks like Lilly Munster.

Mon, 05/14/2012 - 15:21 | 2424615 CharlieSDT
Mon, 05/14/2012 - 13:42 | 2424308 FlyoverCountryS...
FlyoverCountrySchmuck's picture

HAIL PPT!

Mon, 05/14/2012 - 12:50 | 2424144 Harvey Lee Oswald
Harvey Lee Oswald's picture

Gotta love that 11:30 melt up where all the problems mentioned above are forgotten.

Of course, that is until around 3:45 when everyone remembers that Europe opens again tomorrow. What a fucking joke, I hope shit goes down tomorrow when Greece has to pay those hedge funds.

Mon, 05/14/2012 - 12:50 | 2424158 youngman
youngman's picture

Its funny but they are not having the daily meetings like they were with the Greece bailout......to me this is bigger....they should be having breakfast lunch and dinner meetings.....all nicely catered of course...unless ....and I think this is happening...they have gone under the table....money is moving...just no one is saying anything about it....when you are drowning...you do not need to tell the truth anymore....you can go to church later if you survive..

Mon, 05/14/2012 - 12:54 | 2424171 trebuchet
trebuchet's picture

No one to meet.... smaller EU states waiting for Hollande/Merkel meeting and everyone waiting for greek pro or anti euro govt to emerge.

 

markets waiting for no one this time

Mon, 05/14/2012 - 14:36 | 2424493 Nobody For President
Nobody For President's picture

Godet.

Mon, 05/14/2012 - 12:58 | 2424175 Bubble
Bubble's picture

Can we make it till the 20th June Fed meeting, or will they step In sooner?
Seems things are finally getting real.

Mon, 05/14/2012 - 13:15 | 2424238 junkyardjack
junkyardjack's picture

Yea the S&P is down 5% from this years peak...

I think we're going to have to wait for it to get realer 

Mon, 05/14/2012 - 13:56 | 2424338 Bubble
Bubble's picture

Oh right, I'll just keep an eye on the S&P chart, the ones above are irrelevant.
Thanks

Mon, 05/14/2012 - 13:00 | 2424188 SmoothCoolSmoke
SmoothCoolSmoke's picture

Here's the plan for the rest of the week:

1. Pump market the rest of today, then....

2. Manip econ data right up until ......

3. FB IPO.

 

Mon, 05/14/2012 - 13:15 | 2424235 junkyardjack
junkyardjack's picture

With all this market overhang you can buy on the first day for a good price...

Mon, 05/14/2012 - 13:05 | 2424209 navy62802
navy62802's picture

But but but .... Europe is fixed, right???

I just hope these fools sell all their gold and bring the price down so I can load up!

Mon, 05/14/2012 - 14:41 | 2424510 Nobody For President
Nobody For President's picture

Navy, you have been asking this question - making this query - for days and days and days now, and nobody has answered you:

 

But but but .... Europe is fixed, right???

BAD ZHers! BAD.

So I will.

No.

I'm terribly sorry to bring you this news.

BUT, it IS being worked on by several important Committees in Brussels, and anouncements can be expected any week now.

Mon, 05/14/2012 - 22:58 | 2425684 StychoKiller
StychoKiller's picture

There's a PM sale on right now, don't settle for less!

Mon, 05/14/2012 - 13:07 | 2424212 skepticCarl
skepticCarl's picture

The emerging markets, measured by the ETF "eem" topped out at the end of February, and now are down to January 2012 levels.  Brazil, typically the leader, is down to November 2011 levels.  These stocks probably are the least likely to benefit from the Fed's EZ money policies.

The European ETF's topped out mid March, and are also down to Dec-Jan levels.  It's the U.S. markets that topped later on May 2 that have yet to fall that far.  Got puts?

Mon, 05/14/2012 - 13:10 | 2424224 Snakeeyes
Snakeeyes's picture

Poor Spain. Their house prices continue to fall requiring more bank disturbances and more capital infusion. While not as bad as Greece's yield spike, Spain jumped as well as you point out.

US Treasury 10 yr dropped AGAIN. And the German Bund had a similar drop.

http://confoundedinterest.wordpress.com/2012/05/14/med-uncertainty-greek...

Mon, 05/14/2012 - 13:17 | 2424241 q99x2
q99x2's picture

Should a responsible person sell like hell if there is even a slight possibility that stocks will drop 20% or more? Maybe that is what they've done and are already done and someone has given the FED buy spy stick to Obama so he has something to do while he is on vacation. He gets up and gives the stick a pull or two around 11:30 then everyone and their algo is on to it so free willie saves the mood the world over and the US has decoupled to its a job and someones got to do it,

Mon, 05/14/2012 - 13:49 | 2424316 CrashisOptimistic
CrashisOptimistic's picture

"(pay less attention to yields now as they will be flattered by the ripfest run to safety in bunds)"

 

No, Tyler.  The finance ministries of these countries don't give a shit what German bunds are.  What they care about is WHAT THE BUDGET IMPACT IS FROM NEW ISSUANCE.

Yields are EVERYTHING.  Not nothing.

The finance ministries need to borrow.  If Bunds are at -3% and they, country XXX, can borrow with a spread of 3% over bunds, so fucking what?  Even if that spread is an all time historical record, they get to borrow at 0% and rush to do so.

THAT is all that matters.  Keeping the balls in the air depends on yields, not spreads.

Mon, 05/14/2012 - 15:16 | 2424611 Alejandrito
Alejandrito's picture

Spain in pain.

Ibex is at same level of 1996:

http://alejandrogarciastock.blogspot.com.es/2012/05/pain-of-spain.html

Mon, 05/14/2012 - 15:51 | 2424723 earleflorida
earleflorida's picture

BTFD is now officially on hiatus...

Do NOT follow this link or you will be banned from the site!