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Pre-Auction Reminder: Spain's Running Out Of Ammo
Ahead of the French and Spanish auctions this morning, which given their widespread discussion as catalyst numero-uno in the resurgence of systemic risk in Europe are likely to be pumped and presented in the best possible light for all to gorge their bullish eyes on, we thought it worth a quick reminder of just how awkward things might be getting in Spain. As the WSJ reports tonight, the main (and likely only outside of CDS-bond basis traders) buyer of Spanish bonds is the Spanish banks and they are running very dry of ECB-provided cash money to do their bidding. UBS estimates that there is a remaining EUR21bn of pocket-money with the banks to cover the EUR47bn that Spain needs to roll this year alone.
The simple sad fact is that finding buyers of last resort are dwindling as the banks lose their deposits to the core, cover their own significant redemption needs, and struggle to choke down more Sarkozy-inspired sovereign (carry) debt - all the while leaving an ECB unable to directly enter the primary market (hence Soros' recent SPV financial engineering workaround to enable this).
Besides this uncertainty there are four things are critical to remember before you go all-in on your Spanish 10Y bid (or judge the post-auction hysteria).
1) Bid-to-cover is a useless statistic in these cases as a plethora of bidders (e.g. basis traders - note the current basis is +19bps - which posits 'selling' bonds not 'buying' them - which means the auction would have to come dramatically cheap to secondaries to make it attractive for the hedgies) would be willing to pick these bonds up at extremely high yields should they trade there (e.g. how much would you bid at a 30% yield? 40% yield?) and in no way reflect real money's risk appetite;
2) Every time the ECB steps into the secondary Spanish bond market via its SMP program it subordinates your freshly minted bonds (via its Greek-related unwillingness to take a haircut);
3) It's all about the yield - if these bonds come cheap to secondaries and notably beyond the previous auction then that is the critical signal of what is being anticipated and given the rapidly diminishing bucket upon which the Spanish banks can draw to fund their domestic symbiotic partner, we suspect it will not be pretty; and
4) Given the EUR46bn that the Spanish banks themselves need to roll in the next three months, we suspect they will prefer to keep a little more dry powder than blow it all on their sovereign purchases today.
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Don't worry, the socialists in France are gonna solve everything. They gonna raise taxes, give a new bailout, and go for a new EU treaty where every economy in the EU is controlled by the ECB.
France is socialist as much as America is capitalist.
Bush-Obama gave banksters everything.
Sarkozy at least had the balls to reign in banksters.
http://www.zerohedge.com/article/sarkozy-goes-postal-jamie-dimon-says-ba...
world is going to raise taxes to pay for bankster gambling debts.
politicians still care about citizens because they need the votes. banksters and top 0.1% don't give a shit where they crap.
I f France is not Socialist who is? Who infested the EU Bureaucrats with French Socialists? The French Socialists? thnks to them we now have this one size fits none shit "currency" called the EURO.
America has been socialist since 1935. Are you people morons? 45% of the GDP is government in America. 1935. They do not refer to it as social security for nothing.
Precisiment, mon Cher.
The French (we) are the type of socialist like Jacques Cheminade who says breaks teh bank in two and let the investment bank who made bad decision go bust. He almost sounds like Jim Rogers.
Thanks for the link, Point Counter-Point. I had managed to miss that fracas.
"Spain is running out of Ammo"; don't worry, being good little Socialists, I'm sure they'll save the last round to shot themselves in the foot with.
I think there is also the question of how much ammunition Spain will have to back its banks as more of them report bad debts as shown below.
Good points, econsammie. For some it's been uplifting.
http://www.youtube.com/watch?v=98WtmW-lfeE&ob=av2e
Article is Spot on!
In this dreck, Bernanke dripped drool!
How else could this possibly end?
Is today the day?
I'd look out for Sunday night,myself! Out of Asia.
If you get a sucker punch, right to Bernanke's jaw, this market comes unglued.
The dollar surges, gold pulls back, even futher.
Stocks / risk asetts are shunned, everyone for the door!
We know how this turns out.
Be carefuld folks...
May the good lord watch over this fragile little experiment in freedom we call America
God Bless The Virtuous
/where did Yen Cross go?
,I guess you be his cuckhold. It's cool though.
/commenting <has> gotten so much worse here over the EARZ
Viva Espana :)
Totally Pete. I'm sure it was uplifting for you to make this worthless comment, as all your worthless comments have been the same.
Just saying - Thursday nights are kinda slow. The ZH community could use a self-decapitation for LOL purposes. Why not do something with your life?
And yet the irony is that you won't yet the best thing you could ever do is chop off your dome on ZH.
Viva Espana...Aye curumba!
Fair response, tMLp. And let me give one to you and Pete, too.
Get over on other people. Commenting on the internet is fuking weak.
Plenty of people here surely know that already. I'm just figuring that out. Call it the Wonder Years. LOL.
http://www.youtube.com/watch?v=dzuwu0KFDL0
why dont you care on YOUR business IDIOT?
It must be nice to bowwor money at practically no interest and then use it to buy something that pays more interest. At least until the Eurocrats tell you you need a hair cut.
No problem, the ECB, FED and the JCB will buy Spanish bond through proxies.
Exactly when is the auction. It's not hard to figure out it's at 8:30, but 8:30 in which time zone is a little more difficult.
9:30 London time.
True, FC. I guess it's 9:30.
One must totally have a half-smirk on their face when they log in with the userid of "FinalCollapse". But I digress...
...the good guys lost. It's still fun to see the good guys get on this site and get all pissy about things.
Calling all silver-hoarding spacemonkeys: rock out to this. I don't like it any more than you, but let's deal with reality. Fuking "Final Collapse" and his crew are running the show on ZH these days. Deal with it.
LOL
http://www.youtube.com/watch?v=jadvt7CbH1o&ob=av2n
Thanks for the link. I enjoyed listening to it.
The Spanish (and French too) auction no doubt will be pumped up. Steer attention toward one event and then manipulate it. Ignore all other bad news. Turn off the lights and put spotlight on one point on the stage and let the fools/muppets enjoy the play.
Agreed. I saw a headline in Market Watch where Yahoo beating estimates was in big bold letters and Intel missing their estimate was in smaller letters farther down the page. Huh, yea, that makes sense because Yahoo would be the big headline with their market cap of 18B, while Intel's is a measly 240B.
Sooo... We're looking at higher yields tomorrow? 6.00 or more?
The banks will use free money to buy the bonds and then as a bonus will make money when the stock market explodes to the upside. You could see that the banks already positioned themselves on the long side even before the trading has begun.
How long can this go on? The well is running dry.
I know, I am sick and tired of this bullshit.
Everyone remember, these will be bought with bits of paper that are irrelevant. They make you focus on this 'significant' issue.
*SPAIN SELLS EU2.54 BLN IN BONDS VS MAXIMUM TARGET EU2.5 BLN
Great - we have unicorns roaming the meadows of Europe and shitting Euros. All is well.
I am happy for the Socialists to have a go - Sarkozy doesn't seem to have been much use even though he is well-connected in the CIA. He was French Finance Minister in 2004 and President since 2007......fortunately French banks emerged unscathed from the Economic Collapse [ha ! ha !] and Lagarde did not need to lobby Paulson to rescue AIG to prevent a French banking collapse because of CDS
It is helpful of the ECB to provide the funds to Spanish Banks to facilitate Capital Flight - that is the purpose isn't it ? It helps recapitalise British Banks in Offshore Centres running Trusts to buy real estate in exciting jurisdictions like Florida, Canada, London and hide the missing funds.
In about 3 years time CNN or BBC will do a special on how the Banks were looted and needed ECB funds to keep afloat - it will be such a scandal ....and the cows watching the programmes will go to the salt-lick and moo when the politicians promise to deal with it.
I think I'm right in saying it's options expiry week in the US so I don't think we'll see much happening until that's out of the way (tomorrow).
Please correct me if I'm wrong on that info!
DavidC
Now that Spain has accumulated all this debt that was so readily handed to them by the bankers, it's time to cough up that huge hoard of gold and silver. Who's laughing now?
(ECB) 'We aren't allowed to buy these bonds direct, but we need them bought by someone'
(Spanish Banks) 'we ain't got no moneeey'
(ECB) 'here's all you need; buy the bonds and give them to us as collateral'
WTFF (flyin')
Do these guys think this is just a temporary problem? Is there absolutely no-one in there who can understand facts?
Is there no-one who fancies their chances of promotion if they try to face up to the consequences of the road the Troika is on?
Nobody?!!!!!!!!!?
So what do the big corrupt forces do when the truth comes out on the giant PONZI?Of course,attack Egan Jones and destroy!