Sentiment Crumbles On Relentless Euro Crisis, French, Italian And Spanish CDS Hit Records

Tyler Durden's picture

Despite Congress passing the debt ceiling hike, the market's reaction has been swift, brutal and vicious as ever more attention is being paid to Italy and the unforgiving European crisis. As both Spanish and Italian spreads hit new all time records, while CDS are at all time wides for the two countries plus France, the vigilantes are once again preparing to attack and test the ECB's resolve to keep the Euro alive: at this point it is obviously a losing game although expanding the EFSFS to $2 trillion is inevitable (at which point the reaction to German spreads will be swift). In the meantime the scramble for safety is at 2011 highs, with gold on the verge of another record, while the 10 Year US Treasury touching a low of 2.685%, and UK Gilts touching record lows: remember - this is all to make QE3 more palatable when it does begin. Lastly, Bloomberg's TJ Marta summarizes all the market indicators of a day in which sentiment has truly crumbled and in which we expect Italian bank stocks to be halted at least 3 times before market close.

From Bloomberg All News:

  • Italian and Spanish spreads widened to euro-era record levels and 10-yr gilt yields slumped to record low after recent PMIs added to concern the global recovery is faltering.
  • 10-yr gilt yield -3bps to 2.78%; hit 2.77%, lowest since at least 1989 when Bloomberg began collecting the data, on speculation of fresh QE or tax cuts to boost growth
  • European stocks fall to 10-month low, Swiss Franc rose to a record against the dollar; 5-yr CDS for France, Italy and Spain rise to records
  • Although no significant negative headlines overnight, price activity suggests that EU crisis is at imminent risk of worsening
  • Euribor/OIS spread +4.75bps, 2.7 std devs, to 38.6bps, high since Jan.; 1yr euro basis swap -5.6bps, -2.3 std devs, to -39.0bps, 3rd-lowest since Jan.; all other general risk indicators flashing red
  • Eurodollar interest rate future yields higher, sign of US$ funding stress
  • EU peripherals almost all wider, with significant moves for Belgium 2, 10yr, Italy 2yr; record wides for Belgium, Italy, Spain
  • Swiss franc outperforming all major currencies on risk aversion, new record low vs. euro; A$ underperforming after RBA held rates steady with dovish rhetoric
  • Barclays Cuts 3,000 Jobs as Investment Bank Profit Declines

All in all, expect continued selling until 11:30 when Europe closes, and the low volume US-based levitation machine takes over.

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Dismal Scientist's picture

Volumes are pathetic, trading rooms are morbid and its eerily quiet. This is looking increasingly like 2008.

Sudden Debt's picture




The year Obama got elected for President...


Let's hope 2011/2012 ISN'T LIKE 2008 AT ALL!!

i-dog's picture

It's no longer even worth commenting on this farce between the EU and the US.

End the Feds!! (Federal Reserve  &
End the European 'Experiment'!!

topcallingtroll's picture

The death of what has been derisively called anglo finance has been greatly exaggerated.

Italy and Spain and Spain are getting ready to jump without a parachute.


I generally don't advise that.  In this case I will make an exception.

Sudden Debt's picture



Van Rompuy said it best! = "I have no idea why the markets react like this"

Good to know we have our smartest and briggest idiots at the steering wheel...




Thomas's picture

At least he is telling the truth.

heyligen's picture

That is why there is so much dark matter lobbying behind the scenes to appoint them in an undemocratic way. Jeethner neighter has a clue. Dumb asses to steer the ship where dark forces want it to go.

Josephine29's picture

I think that there is a lot going on and it is easy to miss things. Here is a link to a thoughtful article which suggests that the rise of the Swiss Franc is causing trouble for the Euro project and Italy in particular.

The surge in the Swiss Franc is causing the latest problems for Italy via her weakened banks

It would appear that the Italian banks did plenty of Swiss Franc lending which may be returning to haunt them at these levels...


oogs66's picture

Nothing like getting slapped around by some unintended consequences by our central planners :)

Sudden Debt's picture

just wait untill they back the swiss franc up by gold...

Ghordius's picture

Totally unnecessary. Folks, the truth is neither Gold or Swissie are going up much.

EVERYTHING ELSE IS GOING DOWN (some slower, some faster).

I expect the Swiss are going to debate to split their currency this fall, something similar like South Africa had (for the opposite reasons).

TSA Thug's picture

Morning Frankness®

This one is dedicated to the gang.

"I get a kick out of you"

ZeroPower's picture

the vigilantes are once again preparing to attack and test the ECB's resolve to keep the Euro alive

Disagree, we're keeping them honest.

Sudden Debt's picture

but it's not patriotic!

Patriots go down with the sinking ship!


Now was it Patriots or Parots....

Larry Darrell's picture

HSBC cuts 30,000

Barclays cuts 3,000

I'm both delighted that these financial voodoo institutions are decreasing in overall profitability and horrified to think that all of the power continues to concentrate in fewer and fewer hands.

Sudden Debt's picture

Don't worry! HSBC will hire 15,000 new once in Azia!


Gully Foyle's picture

Found this via

small dead animals

JP Morgan warned clients that Italy has a thin margin of safety and risks running out of cash to cover spending as soon as September. “Italy and Spain will run out of cash in September and February respectively, if they lose access to funding markets,” said the bank’s fixed income team of Pavan Wadhwa and Gianluca Salford. Worries about Italy’s immediate cash level risks leading to “a self-fulfilling negative spiral.”


Sudden Debt's picture



Don't worry!

AMERICA HAS 2.4 TRILLION TO SPEND! Obama will bail them out.

moneymutt's picture

You are a broken racist record obsess over Obama like he, and he alone, has led us into this mess. Get out of your own boxed up head sometime. Obama and Biden could disappear tomorrow, would we be better off with Boehner in charge, would have McCain with his lead adivsor Gramm been less of a tool to Wall Street? Was Paulson better than Geithner, did W try to fire Greenspan or Bernanke?

Ghordius's picture

Relax, moneymutt, he is an European taking poetic liberty.

Exchange Obama with US Authorities including the FED. He has no better opinion of Bush, if this easies your mind.

Lednbrass's picture

Too much Hopium damages brain cells.

Pay Day Today's picture

Sure will, via GS and JP Morgue, to make sure that the banksters get a fat cut and that the people of Spain, Italy and Portugal get the shaft.

oogs66's picture

The last bailout was less than 2 weeks ago had no details and had no realistic chance of stopping the inevitable slide

sangell's picture

and Italy drops out of the EFSF. Its like '10 Little Indians', they go one by one until there were none.

Quintus's picture

Everybody knows there's only one Indian really in play.  I hope the Germans are feeling generous.

sangell's picture

True but Italy had been expected to provide around 15% of the EFSF funding for the PIG states. Each time a country drops by the wayside the Franco-German commitment grows larger even though the EFSF does not.

Quintus's picture

If they were honest with themselves, I suspect France Spain and Italy all signed up for the EFSF without seriously expecting to ever having to contribute to it.

It's just another in a long line of clever French schemes to relieve the Germans of some more money.

Ghordius's picture

HA! Not even the Germans signed up with serious expectations.

No, it's all a (half-) clever scheme to withstand the CDS pressure bullshit.

Quintus's picture

It's like an interminable play that never ends, but drags on repeating the same scene over and over in ever decreasing circles.

Just die already, you ridiculous Frankenstein's monster of a currency!

tim73's picture

Yeah, dollar must go!

Quintus's picture

Yup.  Dollar's just as bad.

Ghordius's picture

I wonder how it is that so many people have something against the EUR.

Do you have any interest in it? Or betting against it? ;-)

Quintus's picture

I regard the Euro as a weapon of the unelected and illegitimate proto-dictatorship that is being built in Brussels.  It also happens to be the weakest point of this unloved and unwanted bureaucracy.  The one area where Bullshit and undemocratic arm-twisting cannot achieve the outcome the Eurocrats desire.

As such, I want it to fulfill its manifest destiny and go to the great scrapyard in the sky where all previous similar attempts at cobbled together currency unions have ended up.

I hope that, by its failure, it will advance the rejection and fall of the entire EU Supra-State project.

Ghordius's picture

Hmmm... let me see...

Proto-Dictatorship in Brussels > Sounds like something I was reading on some Murdoch media...

Undemocratic arm-twisting... Eurocrats... EU Supra-State project...

compute... compute... result/guesstimate: you don't live in the Eurozone (77%), you are British (47%) and you have no clue about how Brussels functions (51%).

Is my analysis correct? ;-)

Quintus's picture

"Undemocratic arm-twisting"

cf. Forcing Ireland to have multiple referendums until they produce the right result on the Lisbon Treaty.

cf. Ignoring the French and Dutch 'No' vote on the Lisbon Treaty, changing the name of the document but nothing else and then ramming it through without another public vote.

cf. Forcing Ireland to take a bailout they didn't want and fought against for the 'Good of the Union'

Sounds like undemocratic arm-twisting to me.


"EU Supra-State project"

I cannot conceive of how one could imagine an EU with it's own police force, anthem, diplomatic service, parliament, tax raising powers, foreign policy etc. to be anything else.

Now they are pushing for full transfer union and a central fiscal policy.

Sounds like a 'Supra-State' body to me.

Ghordius's picture

IMO the arm-twisting is not coming from the EU, it's coming from the specific Governments.

Forcing Ireland to have multiple referendums: not possible without the Irish Government & a majority of the Irish Parliament.

Forcing Ireland to take a bailout: the same. Bailing out Anglo-Irish: last government.

The EU & EuroZone seem to take a lot of heat from the GOVs, eh?


EU Supra-State Project: IMO this exists only in a few technocratic French heads and in the ENGLISH SPEAKING MEDIA.

Full trasfer union? Central fiscal policy? NO WAY. Why? The Govs are against it.

EuroBond & EuroTax? This is something the banksters are lobbying for. They would LOVE it. The churn! The fees!


IMO the best way to understand what the EU is: a Syndicate of Governments. And the ECB is a Syndicate of Central Banks.

In order to do any harm to a citizen, they have to get the respective Government on board. I prefer it this way, to be frank. 

Ghordius's picture

This is one of the things that baffles me: why should the currency union be the "weakest point of this unloved and unwanted bureaucracy"?

Technically, you could scrap the one without touching the other. They are designed this way.

The other currency unions? They were simple "let's have all precious metal coins in the same size & weight". You can't compare much!

Quintus's picture

Technically, you could scrap the one without touching the other. They are designed this way.

Somebody better tell the Germans.  They seem to think that it is worth saving this ridiculous currency because it is essential to Europe.


"A Europe without the euro is unthinkable" - Angela Merkel July 22

Although I will grant you that hers is an interesting perspective since we have demonstrably had many thousands of years of Europe without the Euro.


Ghordius's picture

LOL! Yes, Merkel is talking a lot of BS, a prime requisite for the head of a Government! You see? If the Germans become angry at the situation, then they will vote for a coalition that perhaps takes Germany out of the Eurozone (without exiting the EU).

The Germans are pining the loss of their currency, they want a HARD currency. Some political circles in Germany are also seriously angry at the Irish Government for bailing out Anglo-Irish, by the way. That was something Ireland should NEVER have done. I hope the next cases will be handled better.

swissaustrian's picture

The left (Die Linke) won´t do anything against the EUR-madness. They are to stupid and they´re internationalists.

The liberals (FDP) won´t either because they´re bought by the banking lobby.

Merkels CDU is under control by Mutti and Ackermann.

The social democrats (SPD) and the green party (Die Grünen) think that the Euro is some kind of a peace guarantee for the continent, therefore they won´t do anything. Additionally they are also clueless.

Right wing populists don´t have any real influence in germany for historical reasons. They are dumbheads as well.


If the true liberals aka libertarians would still exist in German politics they should be rebelling. But their party (FDP) is a corrupt piece of shit.

Ghordius's picture

Yes, it's sad how deep the German FDP has fallen from their ideals. And the Swiss FDP looks a bit anemic, at best...

A country like Germany with all those family-led "Mittelstand" medium-sized companies exporting all around the world would naturally have a "globalist" approach in many things.

Would you as Swiss advise the Germans to leave the Euro? What do you think about the CHF re. the future?

Ghordius's picture

Don't forget Schäuble! Merkel has a scientific background and no clue of economics, he is the one that is really in charge at the moment...

Die Weiße Rose's picture

crisis or no crisis, how can the Euro be that high against the US Dollar ?

Ridiculous, the Euro has got to come down a lot more,

even though Bernanke won't like it when the USD gains against the Euro !

Ghordius's picture

You might want to start looking the other way round: the EUR is not really gaining at all, the USD is falling. Or can you buy more CHF and Gold with your EUR?

Cassandra Syndrome's picture

The Greaseball Stock Exchange is now down 26% since March

gwar5's picture



The constant global drama flirting with economic armageddon is just letting TPTB stripmine economies while simultaneously wearing down the people into embracing a one world currency.


"If they were merely stupid, they would occasionally make a mistake in our favor." -- James Forrestal.

tim73's picture

Applying the same logic to USA, when Florida or California declares bankruptcy, dollar is finished?

Quintus's picture

It would be if you overlook the small detail that the US is explicitly a transfer union where each state agrees to fund every other state in accordance with overall Federal goals.  Taxpayers in New York cannot refuse to pay Federal taxes that are then used to support California.

The Eurozone does not have this mechanism.  Taxpayers in Germany may (and do) feel they have no moral or legal obligation to support the Italians or Spanish.  If they express this in the voting booth, nobody can make them pay up.

That, my friend, is the difference between the EU and the US.

tim73's picture

Except most US states are equally or worse bankrupted than even the PIIGS and the "good" few states cannot possible save them all.