Scramble For Spanish 'Bail-In' Trade Sends Spanish Bank CDS Soaring

Tyler Durden's picture

It would appear that for once just talking about a potential solution and throwing larger and larger completely unfounded and intangible numbers around as evidence of a 'grand plan' is not going to work as Spain officially requests its bailout. However, just as we noted last week (and suggested as the next macro trade to watch), the bailout will come with strings attached; and perhaps, just perhaps, that is why Spanish bank subordinated credit spreads are deteriorating so rapidly this morning. Our call for a 'bail-in' type solution that crams sub and some senior debt is not only causing Spanish banks to blow wider but also spreading into the Subordinated debt of Italian banks as traders scramble to protect those 'juicy' yields which now seem a little more worrisome given their position on the capital structure. The more liquid Senior and Subordinated credit indices have decompressed around 6bps this morning to a 177bps spread differential (as Subs trade 15bps wider at 465bps on average) and remains the 'easiest' way to position for a 'bail-in'. We also note that the LTRO Stigma (the spread between LTRO-encumbered and non-encumbered bank spreads) has blown back to near-record wides in the last few days.

Two of the biggest Cajas (seen below) are experiencing dramatic widening in their subordinated CDS (equivalents) this morning...

and that subordinated CDS bail-in 'concern' is leaking into other major banks also...

and LTRO Stigma has surged back to near record wides...

Charts: Bloomberg and CMA

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LawsofPhysics's picture

"Winning".  predicted some time ago.  So when are the "ratings" agencies going to junk the world and simply go away.  These people are less than useless.

GetZeeGold's picture




Up....that's good right?


battle axe's picture

"Badges, we need no stinking badges" old movie quote.....

DormRoom's picture

shock doctrine.  Germany gets a new Europe in its image.  Enroll your child(ren) in German language schools asap.

bdc63's picture

I still say that it's GERMANY that succeeds from the union and abondons the Eruo.  Frankly I can't believe they didn't do it a year ago.

LawsofPhysics's picture

LMFAO!!!  You forgot your < sarc > flags, but if you are indeed going to go down that road, you might consider learning mandarin instead.

GetZeeGold's picture



I think it's safe to simply imply the sarcs at this point.


Temporalist's picture

Nobody expects the Spanish "Insurrection"!

sudzee's picture

Greece was supposed to run out of money today as I recall. Have they beeen "saved"?

smb12321's picture

I think a new broke date was announced since the government is holding some checks.  It's what happens when the overwhelmingly major player in the economy is the State and investors finally realize the nature of the game.

rsnoble's picture

Off topic, just an interesting story of how things are in the USA:

Meanwhile the criminal banking cartel gets away with murder, literally, stolen trillions etc.

In the USA 1 in 3 people have a run in with jail. You can go to jail for LIFE for stealing food 3x.

I seriously hate this country, but that has recently expanded to the entire planet. I'm not much for the argument 'i like the planet, it's the people' because they aren't going anywhere.

LawsofPhysics's picture

You are correct sir, until there are real fucking consequences for bad behavior at all levels of society, nothing will change. Where the fuck is Jon Corzine?   Want to restore market confidence?  Hang that fucker along with all the CEO's who drove their companies into the ground and then recieved a bailout.  The "markets" would rally overnight.

dwdollar's picture

Good 'ole American (un)justice.

$10 for a new chicken and the case should be closed.

In my town, enforcing seatbelt violations is more important than investigating murders. One generates revenue for the broke city, the other does not.

FranSix's picture

The irony in all this is that laws will be passed requiring financial institutions to own gold as a risk-free asset in order to be able to be insured.

yogibear's picture

Solution for the central banks is to throw money at it and print, print, print!

Oldwood's picture

I bet the whole thing craps out....and then we build another just like it, but bigger! It will have to work then, right?

covert's picture

short opportunities are not too far away.

AbbeBrel's picture

I gotta say that the rational (that is to say : money making) instincts on this board are rather suspect.   The discussion sound a bit at times like a bunch of adolescent whinging (pardon my English).   If you want to find a rational discussion that is more related to trading try slope of hope dot com.

localpacific's picture

Spain is FUBAR ---- Spain's Pain Sends Markets Down The Drain