Wall Street Response To Italian Auction

Tyler Durden's picture

Here is the kneejerk Wall Street response to the key event of the day. Funny how the Italians think it was a good auction and everyone else kinda sorta disagrees. 


"Decent even though slightly disappointing (compared) to yesterday's auction. The 2022 bond was well bid, they sold 2.4 billion at the high end of the 2.5 billion range. The key thing that we saw yesterday was that Italian paper still commands a maturity premium. People are still concerned about the credit risk so the longer the maturity the higher they pay. All in all it's a decent reception."


"While yesterday's 6-month bill rates declined to half the levels of the previous auction, today's decline in the auction yield by 'just' about 60 basis points versus end-November in such a high-yield territory underscores that the genuine pressure on Italy is still tremendous, despite bold ECB actions that has given the short ends a big boost.

"Not moving closer to the upper end of the target range is also very unusual for Italy, i.e. not a good sign."


"These have been rather average auctions. The amount sold is 7.02 billion euros versus a 5-8 billion euro range, and the yield improvements we see in the auctions were largely already priced into the secondary market in last week's LTRO-fuelled rally."


"It is slightly positive that they were able to issue the full amount in the 10-year and we have started to see some reduction in yield ... but 7 percent is still a very weak (result).

"The bid to cover ratio in the three-year was weak, but we are 200 basis points below the (yield) level of last month. The rally in the short-term is positive.

"It is also slightly positive that they were able to issue 7 billion given that we are on Dec. 29."

Via Reuters


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Spooky Polish's picture

What you see depends on where You sit ... 

smiler03's picture

What a stupid title, "Wall Street Response to Italian Auction".

You then quote three London Strategists and one in Amsterdam. Where the hell does Wall Street come into it?

GeneMarchbanks's picture

"Not moving closer to the upper end of the target range is also very unusual for Italy, i.e. not a good sign."

Yes. Unusual's the word...

Irish66's picture

wait an hour and see what the rates do

youngandhealthy's picture

"...everyone else kinda sorta disagrees...."

HELLO!!!!!!!!!! CAN U READ?

whats wrong with U? Normally very accurate but now U R carried away

Ghordius's picture

when it comes to all things beginning with eur- the early-morning-tyler is just grumpy...

you get used to it after a while...

Schmuck Raker's picture

Y & H, Ghord, who's fooling who?

I can get a 30 year mortgage for around half of what Italy pays to borrow for ten years.

Open. Your. Eyes.

Ghordius's picture

I. Have. My. Eyes. Open. Since. I. Bought. Italian. Buoni. Ordinari. Del. Tesoro. In. Lire. For. 15.75%. Long. Time. Ago.

you should compare the amount being borrowed at 7% versus the amount that currently isn't

we still have a looooooong way to go - you don't seem to know much about bond markets, a hint:

99.9% of the time they are slow, 100% of the time they are political

your 30y mortgage in USD in the US is part of one of the most subsidized loan schemes ever made and you should know it

Italy brought the ratio from 120% of GDP to 100%, not that long time ago - it took a decade without really trying too much

Schmuck Raker's picture

"....30y mortgage in USD in the US is part of ONE OF the most subsidized loan schemes ever made...."

Another being Euro area, the difference being the effectiveness of said schemes.(Leaving aside the stupidity, etc. of both the ECB/FED)

falak pema's picture

he did say all bond market plays were 100% political...

ZeroPower's picture

EURUSD taking a bit of a breather downward but still new lows from yesterday's move.

ForTheWorld's picture

Gold and Silver seem to have been expelled as well - down to $1531 and $26.85 an ounce respectively.

ZeroPower's picture

Yes, silver negative on the year.

Lots of people here who ordered truckloads at basically any point this year (though most did in the $40++ range) are about as negative as equity index holders. But no they will say, silver was manipulated downward, whereas equities just reverted to reality. 

ForTheWorld's picture

Indeed. I think it's at this point I'd like to see some sort of input from any of the ZH contributors regarding these constant drops that seem to contradict everything that has been said in the last year about PMs. I'm not trying to goad them into some sort of angry response, but I would like to see what people are now thinking, or if they're just pushing out the timeline for when Gold and Silver go to the moon.

tooktheredpill's picture

different people will always have different opinions and will also depend if they are invested in PM's or not. In times of stress the rule book won't help like it used to. What would help is a good profile of gold ownership or some inside information.

smiler03's picture

+1 I have only been at ZH for 6 months plus but one thing I have read often is that Silver is known for it's volatility.

There are the silver bugs of course who are always bullish but I discount the opinion of anybody who says "Silver will be + $nn.nn before the end of the week" et al. 

ForTheWorld's picture

A downvote for stating verifiable numbers? Intriguing.

Bastiat009's picture

Italy is a very wealthy country. Goldman managed to overthrow Berlusconi to take over. Now, things will be fine.

ZH has yet to talk about the gold crash because, I guess, it doesn't fit into the narrative.

hugovanderbubble's picture

Italians doesnt want to be tied to ECB monetary policy.

Italians and spaniards are not German Slaves.

Back to Lira, Back to Peseta...

30-40% devaluation

-Italian Government Yield will raise up to 9-10%

7% x (1.30) = 9.1%

Why the US 10yrs Bond still moving back to 1.9%? ...Cos nobody in Italy wants long term domestic debt...(of course they need haircuts)


swani's picture

I'm sure the Italians feel this way, too bad Monti's in the house.

vegas's picture

That anybody would still lend to bankrupt nations still amazes me. Remember all those that couldn't wait to lend Greece money at 10%? How's that Hope & Change workin' out for ya?



Jehu's picture

They have to mate. If they don't the Ponzi scheme collapses.

farmerjohn2112's picture

The whole of Europe is insolvent and has no problem borrowing twenty bazillion euros from the ECB.

I'm solvent and fairly-compensated and I can't get a loan to fix my house.


hugovanderbubble's picture

Greece will leave the Euro just a matter of days...

the problem is the debt is gonna be paid in drachmas


CDS market -Trigger-Credit Event

Jehu's picture

And if that does happen what is the Drachma going to be worth?

hugovanderbubble's picture

between 50-70% less


For example,

In spain we have entered into EUR at 1 Euro = 166.386 pesetas, just a 40% devaluation = 232 pesetas per Euro...

In Greece will be harder and wider that depreciation.


Nomura has tested this scenario

Countries doesnt want to live in Austerity...Banks gonna suffer.

gojam's picture

What are you basing a Greek exit on ?

hugovanderbubble's picture

In 3 main drivers:

1.- Portugal Treatment may 2011 (Lisbon), allows countries to leave VOLUNTARILY...

-Greeks as Italians will prefer to suffer a huge devaluation in the short term , but control their monetary policy...

2.Greek Reprofiling is a Credit Event, but their payment in Drachmas is not discounted yet---thats the real problem

You have a debt haircut + devaluation in future cash flows.

Iceland has been a test, but ICeland has nothing to do vs Greek Economics

3.-BNP,Deutsche Bank has integrated into their settlement middle and back office software a label with DRACHMAS (its evident Currency Wars is not  a kid game)

GeneMarchbanks's picture

Banks/Brokerages around Europe are testing the waters for a Dra[ch]ma return...

Don't call it a comeback


hugovanderbubble's picture

Bit [ch]ez¡

Banca Ambrosiana part II:¡


Il banquero di Dio¡"

Ghordius's picture

I agree on Greece, not on Italy

gojam's picture

............and Portugal ?

Ghordius's picture

good question - I'd say it all boils down to the way Greece leaves

which should have happened last summer

gojam's picture

You see, I agree with you on Italy because they are obviously being protected but Portugal definitely is not, they are paying double digit interest.

And Spain ? Despite their government taking strong action, including snatching pension funds, their exposure to Portugal could sink them too.

Perhaps it's time to start looking at a GPS exit and not a PIIGS exit.

Schmuck Raker's picture

Pete Tchir intvw @ Bloomberg talks about who may go - good interview, 12/28:

TF's Tchir on Europe Sovereign Debt Crisis

[8 min]

falak pema's picture

peter Tchir does his number crunching in a one sided way; this is a currency war, hegemony play, and what brings Euro down and makes USD haven is the name of the game for some demented hacks. So quack along daffy duck. I don't believe much that comes out of WS pundits as any thing more than skewed snooker play. 

Not that his analysis is wrong as it reflects a market trend with a lot of clout to remanipulate the counter manipulates of the Euro technocrat cabal. WHy take sides amongst Oligarchical shills with hidden, skewed agendas...

Jehu's picture

I'm having flash backs to Nixon's famous quote, "I don't give a sh*t about the Lira!"

Ghordius's picture

Tricky Dick's ghost is everywhere nowadays...

swani's picture

Average and slightly positive is the new horrendous. 

george1982's picture

that was an extreamly shit auction conidering the LTRO, everyone that disagrees is still drunk from xmas! IT WAS CRAP!!!!

hugovanderbubble's picture

Long Rates are raising again after auction...market knows italy has too much debt coming next 1H2012, so will force them to obtain extra yields.

Irish66's picture

Are we just passing the debt ceiling with no debate, no fighting?  That is very telling!

XtraBullish's picture

My gold and silver shorts are now handsomely profitable and I look for continued SQUASHING of the "bugs" as the screams of the "Silver, bitches!" reverberates through the financial world. The PM's are (as stated here for the past month or so) TOSTADA!

fonzanoon's picture

The sentiment on here has been that silver and gold are not falling. They are just becoming disconnected from the paper price. That would imply that you can't find physical to buy today, or if you could it would be at much higher prices. I am curious to see if that turns out to be true. It just seems more likely that the temporary strength in the dollar is lowering pm prices in dollars. Whats the big deal? As the worst debt offenders out there we are getting quite a gift imho.

TireBite's picture

I don't think the disconnect between paper and physical prices holds water at this point. I can still go to my local coin shop and get phys tracking the paper price. I would think an auction market such as eBay, would show a disconnect if there were one, but it tracks spot as well.