Spain Not Uganda - Increasingly Looking Like Vigilante Hell With 2 Year At 6.66%, 10 Year At 7.6%

Tyler Durden's picture

Spain is not Uganda: this morning Spain is increasingly looking like the 10th circle of bondholder vigilante hell with its 10 Year trading at 7.59% after hitting a record 7.607% moment prior. The short end has blown out even wider and the 2 Year very appropriately at 6.66% and rising. Italy has also joined the party blowing out to just why of 6.5% and Italy's banks about to be halted across the board despite the short-selling ban. Next up: selling anything forbidden. Finally, the scramble for safety into Swiss 2 year notes accelerates as these touch a mindboggling -0.44%. There was no specific catalyst to lead to today's ongoing meltdown, but the fact that Spain just paid a record price for 3 and 6 month Bills is not helping: the average yield was 2.434 percent for the three-month bills compared with 2.362 percent in June and 3.691 percent for six-month paper compared with 3.237 percent. With each passing day, the selling crew is demanding the ECB get involved and stop the carnage. For now Draghi is nowhere to be seen as Germany continues to have the upper hand. After all recall just who it is that benefits from keeping the periphery on the razor's edge and the EURUSD sliding.

Some views on the 3 and 6 month bills via Reuters.


"Good ratios, and at rates (that were) less than expected and at decent levels. It is clear that the Treasury can continue to finance itself at these levels, but the problem is private financing. That is to say, the Treasury can do it, but companies cannot."


"It is a good result, with bid-to-cover ratios above those registered at the last auction, when the risk premium was 100 basis points below where it is now."


"All things considered, the result is not so bad, especially since they are auctions of shorter-dated paper that Spain is counting on to retain market access.

"The most important takeaway from this auction is that Spain was able get all its debt out the door. Still, in March, Spain was able to issue six-month debt at a yield of under 1 percent, now it is paying 3.7 percent."


"Yields have crept higher. They got the full amount issued, a shade more in fact. Yields at these levels are still considerably lower than the peaks we saw when crisis tensions last reached fever-pitch last November. But with the curve flat at around 7.5 percent from five years on and two-year yields already distinctly elevated..., this short-dated issuance is merely a sideshow."


"It was largely as expected. People will be relieved it has come and gone. It is not going to change anything for Spain and it is not going to reverse the generally weak trend that we have seen. The fears about the euro zone aren't going to go away.

"The bills are less volatile...and the banks need (them) for balance sheet purposes. That is why they are not a brilliant indication of what is going on. Bonos are a better reflection of investor demand."


"Spain raised the targeted 3 billion (euros), which provides a bit of a relief. But it shows that even at the very front end of the curve, the risk premium for Spanish bonds is rising ever higher.

"The spread between 5- and 10-years moved to negative today, which is a classic sign that the market thinks the current trends are unsustainable for Spain's fiscal dynamics.

"Yields are likely to continue to rise. We haven't seen the 2/10-year curve invert but that is just a matter of time. We have seen this in Portugal, Ireland and Greece. I think it is inevitable now that Spain will need a bailout. It is just a question of when rather than if."

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Ghordius's picture

"...the risk premium for Spanish bonds is rising ever higher" tsk, tsk, how antiquated, "risk premiums". We have CDS for this!



GetZeeGold's picture




I'll just take some Lotto tickets instead......improve the odds.


old naughty's picture

Or,  they should stop murdering those bulls...impove the odds of salvation.

OttoMBMP's picture

"After all recall just who it is that benefits from keeping the periphery on the razor's edge and the EURUSD sliding."

--- Yes? Who is it?

hugovanderbubble's picture

Hugo Peterssen

Default in whole spanish banking system. Corralito is just a joke its going to be 10 x worse. JUST LOOK THE EUR_CHF UNPEG next 1.10 EUR_CHF

All money in Panama and Luxembourg + Switzerland + Belice + British Virgin Islands.




Please De Guindos Resign, ure so bad talented to crash our country. 

MassDecep's picture

666.... the number of man.

magpie's picture

Gold talents for King Solomon

Stoploss's picture

666, the number of the beast,

hell, and fire, are sure to be released.

Iron Maiden



Itch's picture

The difference is that this time all of Europe is getting kicked in the where is the money going?

Offthebeach's picture

What money? There are only paper credit notes, fiat paper. You want " money "? Go to your local credit office( bank ) and borrow all you want, or that the believe you'll pay back.And that's where the money( credit ) is/ went. You, me, 900 million of us can not and or do not borrow, so no credit circulating, no money.( plus the elite thieving of course )

Sid James's picture

"The Bank of Uganda to auction 2-year treasury Bond worth $40 million. The bond has a coupon of 10 percent." (Reuters)

So Spain is not quite Uganda.

OttoMBMP's picture

Well, probably the inflation elment in Uganda might be somewhat higher? Thus, the real rates in Spain are probably well above those in Uganda.

Offthebeach's picture

People adapt to malinvestments. For instance the ever more growth of the welfare amongst the working class who see you can exist more securely on welfare the working. So welfare expands.
Now with the Euro low it helps Germany export and further bailouts support German banks. A break up would cause a day of recogning and hurt exports.
So right now it is good for the power players. They have adapted to the new normal. Muppets not so much.

KNiCKER's picture

"I believe that banking institutions are more dangerous than standing armies... if the American People ever allow private banks to control the issue of currency... the banks and corporations that will grow up around them will deprive the people of their property until their children wake up homeless on the continent their fathers conquered." Thomas Jefferson, 1743-1826


Very applicable to the whole western world...

Silversem's picture

The economy of Spain. It can only go one way: down the drain!

I hate to see this happen, but it does provide us with some excellent trading opportunities

eddiebe's picture

With the advent of the central bank printing press bond vigilanties are a mere shadow. The EU. show is a good cop/ bad cop routine to keep our eyes away from the ball. Pretty effective too, isn't it.

EmileLargo's picture

The Euro has one year to survive in current form - at the absolute maximum.

toomanyfakeconservatives's picture

Coming to America: The return of legitimate Treasury notes, the virtual dissolution of the federal government, and the MASS ARRESTS of thousands of top traitors from Obama and Brenanke on down. The fear-bots that dismiss this as fantasy are the same idiots who dismiss the power of tens of millions of American gun owners, patriots, active-duty military, reservists, veterans, police, federal marshalls, and so on, who took the oath to defend the Constitution.

Txo's picture

What does a bid to cover ratio mean on a cheap ass auction like this one? On the grey market, the three month was trading much tighter than  it came out, and still you read some analysts arguing it was a decent btc ratio. 

Spain s fvcked, but it s been for a loong while. This was obvious  over a year ago. Terrible policies, both internal and from the EU, have led to this. 

In 2008, Zapatero won the election promising zero unemployment and  the strongest financial system in the world. He never pronounced the word "crisis" in public until late 2009. The new administrtion is pretty much the same.

Poverty you can change, stupidity, that s harder.

Segestan's picture

' Spain is not Uganda'...... Liberals suck. They live in denial of the facts. Spain is a civilized nation , Uganda is an experiment.