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Spanish CDS Over 600bps Sends S&P Under 1300

Tyler Durden's picture




 

There is little doubt what the world's pivot security is for now - Spanish sovereign debt. 5Y Spanish CDS just broke above 600bps for the first time ever and S&P 500 e-mini futures reacted by breaking below 1300. Lots of moving parts in Europe's sovereign markets - Spanish bonds were modestly bid today even as CDS was gapping wider - but if one steps back and looks at the basis (the spread between bonds and CDS) this makes sense as it had reached almost 100bps offering basis traders the opportunity to buy bonds and buy protection. We suspect few are outright shorting Spanish bonds here now and the marginal offer is a long-seller but with basis traders still active, do not focus entirely on bonds as evidence of anything until the basis contracts.

European Sovereign CDS...

 

European Sovereign CDS-Cash Basis...

note the bounce in Spain's basis today (light blue line -red oval)

Finally recall what we warned, citing Citi, two weeks ago:

"Our impression is that markets will need to act as the proverbial 'attack dog', forcing the issue on the political agenda. We can't escape the sense that it is probably politically easier to let the markets run loose for the time being to make it apparent that further intervention is needed. But 1000bp on Crossover is much closer than you imagine." In other words, Citi just gave the green light for the bottom to fall from the market just so Europe's increasingly impotent political elite does something, anything. Look for many more banks to sign off on the same letter.

We still have a way to go...

Facebook now at a $26 handle...9 days after reaching $45 on the IPO release...

 

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Thu, 05/31/2012 - 10:59 | 2479534 LawsofPhysics
LawsofPhysics's picture

Spain would gladly pay you 600 burgers tomorrow for one today.  Winning.

Thu, 05/31/2012 - 11:09 | 2479593 jus_lite_reading
jus_lite_reading's picture

Geeeeee.... I wonder why rumors of a "bank holiday" are circulating? LMAO

Let's see. Bond prices in the US are skyrocketing. At these levels, you'd think the US just hit the 2nd greatest depression... with QE4 certain now, something smells rotten in Harlem...

Thu, 05/31/2012 - 11:13 | 2479610 Ahmeexnal
Ahmeexnal's picture

Pass the EuroBONG buddy!

Thu, 05/31/2012 - 11:14 | 2479614 tocointhephrase
tocointhephrase's picture

Gold is back to Green again, nice try though!

Thu, 05/31/2012 - 11:17 | 2479626 LawsofPhysics
LawsofPhysics's picture

Yes, and bond yields are crashing.  This will allow the government to steal even more and loan itself even more (I mean there is no real cost for captial right?  especially once rates go negative - FAIL).  hence, an infaltionary orgy in things you need.  Do people really expect retirees to become bond-traders in order to survive?  FAIL.  All paper burning, the "fire" in U.S. paper and the dollar has simply slowed.  Get physical assets of real value or kiss your future and that of your children bye-bye.  And hey look, gold is green again.  Imagine that.

Thu, 05/31/2012 - 11:49 | 2479750 Zero Govt
Zero Govt's picture

Gold is green, Facebook is red

..and so's Blankfein and Bernankes faces

Thu, 05/31/2012 - 11:00 | 2479537 mrktwtch2
mrktwtch2's picture

this market has some teflon in it..with all this bad news the last few weeks the spx should be at 1250 right now.yet it is still hovering at 1300

Thu, 05/31/2012 - 11:01 | 2479548 Alea Iactaest
Alea Iactaest's picture

Article and/or chart needs a time stamp. I show LOD on .SPX at 1300.38

Thu, 05/31/2012 - 11:04 | 2479562 Alea Iactaest
Alea Iactaest's picture

OK, now we've got 1299.57

Thu, 05/31/2012 - 11:04 | 2479561 CvlDobd
CvlDobd's picture

It's not Teflon. It's a rocket powered pogo stick.

Thu, 05/31/2012 - 11:07 | 2479579 Nothing To See Here
Nothing To See Here's picture

It's tougher than teflon. It's called hope. And when it breaks, watch for the plunge.

Thu, 05/31/2012 - 11:13 | 2479611 CvlDobd
CvlDobd's picture

Odd we spell it differently. You spell it h o p e and I spell it m a n I p u l a t I o n.

Thu, 05/31/2012 - 11:00 | 2479538 BlandJoe24
BlandJoe24's picture

Where are those sovereign (S&P, etc.) ratings (downgrades)?

Thu, 05/31/2012 - 11:00 | 2479539 phalfa5
phalfa5's picture

YOU SHALL NOT PASS !!

Thu, 05/31/2012 - 11:00 | 2479541 Dr. Engali
Dr. Engali's picture

If they could somehow just borrow some more money this would all be fixed.

Thu, 05/31/2012 - 11:51 | 2479765 Zero Govt
Zero Govt's picture

why borrow when you can 'Print'

it's the easiest of options, as preferred by bankers and politicians

Thu, 05/31/2012 - 11:02 | 2479544 Cognitive Dissonance
Cognitive Dissonance's picture

Wake me when they go below 1200. I'll wake the Fed when they go below 1100.

Hell, they're still green for the year with 1258 as break even and 666 as broken.

Thu, 05/31/2012 - 11:02 | 2479554 junkyardjack
junkyardjack's picture

Exactly, this is hardly a crisis.  US equities better realize they need to go down to go up...

Thu, 05/31/2012 - 11:08 | 2479585 Alea Iactaest
Alea Iactaest's picture

There's a whole lotta air between here and 1075/1050

Thu, 05/31/2012 - 11:14 | 2479598 Cognitive Dissonance
Cognitive Dissonance's picture

Down goes Frazier 1300, down goes Frazier 1300.

http://www.youtube.com/watch?v=JZEIMQ42-oU

Too funny! I want Howard Cosell resurrected as a financial play by play announcer.

BTW can we find an industrial strength hairdryer and melt that Faceberg for good?

Poor Zuck

Thu, 05/31/2012 - 11:18 | 2479631 Dr. Engali
Dr. Engali's picture

Is that the shrinking banker bonus pool? Should we start up a "preserve the banker from the global financial meltdown" fund?

Thu, 05/31/2012 - 11:18 | 2479635 vast-dom
vast-dom's picture

NOTHING EVEN CLOSE TO CRISIS UNTIL SP BELOW 800

Thu, 05/31/2012 - 12:00 | 2479811 fuu
fuu's picture

That looks like fun actually.

Thu, 05/31/2012 - 11:15 | 2479620 Dr. Engali
Dr. Engali's picture

What do you mean hardly a crisis?......right now some poor banker is crying because the bonus pool is shrinking.......for crying out loud man think of the bankers!

Thu, 05/31/2012 - 11:01 | 2479547 junkyardjack
junkyardjack's picture

Bullish!...for Treasuries

Thu, 05/31/2012 - 11:03 | 2479555 JustObserving
JustObserving's picture

$600 trillion in derivatves and $300 trillion in the US.  The Fed better act before the whole house of cards collapses. Debts in the world are too large to be maintained let alone paid down.  The only solution is more paper.  What is taking so long?

Thu, 05/31/2012 - 11:05 | 2479565 LawsofPhysics
LawsofPhysics's picture

"The only solution is more paper" -  Wrong, the only solution for the world is to default and clear the bad paper.  Not such a good thing for the owners of the Federal reserve bank, but fuck them.

Thu, 05/31/2012 - 11:20 | 2479605 JustObserving
JustObserving's picture

The banks will not agree to clear the bad paper.  So they will keep on adding more paper until everything collapses.  How many trillions of bad paper will have to be cleared?  

No one knows and clearing one bad debt will lead to other bad debts in this interconnected system of $600 trillion in derivatives.

Your solution is the right medicine but it should have been administered decades ago.  Now the patient is dead. 

The paper games will continue before the final collapse and clearing of bad debts.

That is why they relentlessly attack gold and silver now.  Nothing must be allowed to threaten the hegemony of fiat money.

Thu, 05/31/2012 - 11:23 | 2479646 JailBank
JailBank's picture

The powers that be (FED, ECB, IMF) did not come this far just to quit now. Ctrl-P.

Thu, 05/31/2012 - 12:01 | 2479821 Kayman
Kayman's picture

"the patient is dead."

Festival time for our Financial Maggots.

Thu, 05/31/2012 - 13:00 | 2480168 PulpCutter
PulpCutter's picture

Exactly.  The banks can 'buy' elections for around 0.0000001 of what they hold in derivatives.

Thu, 05/31/2012 - 11:06 | 2479573 Winston Churchill
Winston Churchill's picture

Not going to happen.

If it does the very next day the yuan goes gold backed

and becomes the new reserve currency.

Thu, 05/31/2012 - 11:06 | 2479574 CrashisOptimistic
CrashisOptimistic's picture

That's no solution.

 

Thu, 05/31/2012 - 11:09 | 2479595 Dr. Engali
Dr. Engali's picture

What the hell? More paper? What needs to happen is the bad paper needs to clear. That last thing we need is more paper.

Thu, 05/31/2012 - 11:05 | 2479564 orangedrinkandchips
orangedrinkandchips's picture

Keep on rockin in the "free" world!

 

 

Thu, 05/31/2012 - 11:05 | 2479567 vote_libertaria...
vote_libertarian_party's picture

So I wonder if this causes JPM to sweat a little more.

Thu, 05/31/2012 - 11:10 | 2479597 slaughterer
slaughterer's picture

JPM is GREEN and will not break $33 Maginot line, even if SPX goes to 666.  

Thu, 05/31/2012 - 11:09 | 2479592 fuu
fuu's picture

Gold be green now.

Thu, 05/31/2012 - 11:15 | 2479621 Cognitive Dissonance
Cognitive Dissonance's picture

Two days in a row where Gold has resisted an (obvious) selloff attempt.

Thu, 05/31/2012 - 11:15 | 2479618 slaughterer
slaughterer's picture

FB at $27: isn't this Wall Street's way of showing how incompetent and idiotic Zuckerberg is?  

Thu, 05/31/2012 - 11:56 | 2479788 Zero Govt
Zero Govt's picture

no it's a 1 fingered salute from investors to the Pump & Dump apes on WS

Thu, 05/31/2012 - 11:16 | 2479624 FieldingMellish
FieldingMellish's picture

FB now a $26 handle. What a farce.

Thu, 05/31/2012 - 11:17 | 2479632 orangegeek
orangegeek's picture

And with the USD climbing, the SP500 should continue to fall - SP500 is denominated in USDs as we all know.

 

http://bullandbearmash.com/index/sp-500/daily/

Thu, 05/31/2012 - 11:19 | 2479636 firstdivision
firstdivision's picture

Have no fear, for Brian Sack is here.  Green by 3:15pm!

Thu, 05/31/2012 - 11:19 | 2479638 slaughterer
slaughterer's picture

FB could see $25 handle today if the algos gang rape it.  

Thu, 05/31/2012 - 11:21 | 2479640 slaughterer
slaughterer's picture

I am scared.  I am scared.  I need to buy US Treasuries.

Thu, 05/31/2012 - 11:35 | 2479691 Bubbles and Busts
Bubbles and Busts's picture

The Troika will need to act soon but it's anyone's guess which rabbit they will attempt to pull out of the hat. A supposedly "big" announcement over the weekend (Sunday night?) should not come as a shock. Regardless, further opportunities to kick this can down the road are becoming slim.

 

http://bubblesandbusts.blogspot.com/2012/05/spains-cds-going-vertical.html

Thu, 05/31/2012 - 11:36 | 2479700 CvlDobd
CvlDobd's picture

Dow stick save! Can the bears shove the rebound down the PPT throat?

CAT and JOY don't matter! BTFDNESS!

Thu, 05/31/2012 - 12:01 | 2479819 waldocktrades
waldocktrades's picture

We've been trading this by buying U.S. Dollar Index futures. Simply the best house in a bad neighborhood.

http://blog.commodityandderivativeadv.com/2012/05/17/greek-default-immin...

 

Thu, 05/31/2012 - 12:02 | 2479831 Bansters-in-my-...
Bansters-in-my- feces's picture

RESISTANCE IS FUTILE........

Fuck you Bernanke...!!!

Thu, 05/31/2012 - 12:57 | 2480146 MFL8240
MFL8240's picture

The S&P has no businesss being anywhere close to 1300.  It belongs at about 600 based upon fundamentals.

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