This page has been archived and commenting is disabled.

What Do PIIGS Bonds Know That Stocks Are Oblivious To?

Submitted by Tyler Durden on 07/31/2012 11:58 -0400

While expectations of a Draghi rescuing us all from our bad selves remain extreme - well he did promise! - it seems the market that one would expect to be the most likely to benefit from his 'Aid' is increasingly not Kool. The last two days have seen Italian and Spanish sovereign bond spreads turn back down - even as stocks in those countries keep up the good wealth-building work (with the front-end wider by around 30bps today alone). At the same time, financials have seen their credit risk widen back out (especially seniors) and XOver (the European high-yield credit market) did not exude the kind of equity ebullience that we are used to in a pure risk-on, central-bankers-have-our-back period.

Spanish Bonds vs Spain's IBEX post-Draghi...

Italian Bonds vs Italian Stocks post-Draghi...

and as usual, stocks outperformed credit...

Meanwhile, short-term rates in Germany, Holland, Switzerland, and Finaldn now all have negative rates and the front-end of the Spanish and Italian bond curves are leaking abck wider once again today (ITA 2Y +27bps back over 4% and SPA 2Y +32bps back over 5%)

Charts: Bloomberg

- advertisements -

Tue, 07/31/2012 - 12:01 | 2665307 Concentrated po...

Concentrated power has always been the enemy of liberty.'s picture

Pig bonds, get your Pig bonds, two for a nickel, five for a dime.

Tue, 07/31/2012 - 12:16 | 2665361 Rubicon

Are you the PFJ?

Tue, 07/31/2012 - 12:17 | 2665363 idea_hamster

"What Do PIIGS Bonds Know That Stocks Are Oblivious To?"

Don't crap in your own food dish? No, evidently not....

Tue, 07/31/2012 - 12:18 | 2665364 NotApplicable

Big bond, PIIG Bond, ha ha charade you are.
You well heeled big wheel, ha ha charade you are.
And when your hand is on your heart,
You're nearly a good laugh,
Almost a joker,
With your head down in the PIIG bin,
Saying "Keep on digging."
PIIG stain on your fat chin.
What do you hope to find.
When you're down in the PIIG mine.
You're nearly a laugh,
You're nearly a laugh
But you're really a cry.

Tue, 07/31/2012 - 12:01 | 2665308 vmromk

FUCK every Central Banker on the planet !!!

Tue, 07/31/2012 - 12:24 | 2665384 Byte Me

Prefer attractive females personally..

But - it's a free (market) world, so, whatever turns you on bub.

Tue, 07/31/2012 - 12:01 | 2665309 slaughterer

Last three days is the setting up of a 1929-esque bull trap in the equities market.

Tue, 07/31/2012 - 12:23 | 2665377 HelluvaEngineer

We'll assume it was Robo that junked you.

Tue, 07/31/2012 - 13:04 | 2665478 reginald

yes, we are due for another Reggie Middleton contribution soon.

Tue, 07/31/2012 - 13:21 | 2665557 The Monkey

Or a 2010/2011 style bear trap.

Tue, 07/31/2012 - 12:02 | 2665311 jose.six.pack

abck

Tue, 07/31/2012 - 12:03 | 2665315 mrfreeman

Monsieur Draghi, with these bond purchases/LTRO/QE, you are really spoiling us!

http://www.youtube.com/watch?v=4P-nZZkQqTc

(Or not as the case may be lol)

Tue, 07/31/2012 - 12:03 | 2665317 RobotTrader

MS and GS now up 4 days in a row, would not surprise me to see a little selloff before the Dow launches to new highs later this summer.

Tue, 07/31/2012 - 12:47 | 2665433 francis_sawyer

What you can be sure about is that when GS decides that the BHC classification status that it currently enjoys (which enables them to rape the tax slaves) finally wears out its usefulness, they will naked short (with full leverage), & screw every muppet until the price drops far enough to take it back private...

Tue, 07/31/2012 - 13:00 | 2665467 alien-IQ

Didn't you say the same thing about NFLX...about a year ago?

How'd that work out for ya dickhead?

Tue, 07/31/2012 - 13:20 | 2665552 reginald

I honestly don't know why they junk you RT.
Even though they are short-term, lately your calls have been on the money.

Tue, 07/31/2012 - 13:27 | 2665581 alien-IQ

Since when is saying "GS went up yesterday" considered "making a call"?

I can tell you what yesterdays weather was with 100% accuracy. Does that make me a meteorologist?

Tue, 07/31/2012 - 12:04 | 2665318 bank guy in Brussels

XOver 1100 and Germany can finally 'ok!' to print ... still needs to get hotter in the kitchen

Tue, 07/31/2012 - 12:06 | 2665333 slaughterer

XOVer 1000 (Weimar special) target.

Tue, 07/31/2012 - 12:05 | 2665327 Undecided

http://rt.com/politics/russian-suggests-foreign-currency-469/

Russian MP suggests ban on foreign currency transactions

Tue, 07/31/2012 - 12:06 | 2665329 SheepDog-One

Stocks are hockey-helmeted kids in the sandbox playing tugowar with cat turds....RoboTarder is in there too playin with em.

Tue, 07/31/2012 - 12:27 | 2665395 francis_sawyer

playing the role of the cat turd?

Tue, 07/31/2012 - 12:07 | 2665334 tecno242

"What Do PIIGS Bonds Know That Stocks Are Oblivious To?"

ohh.. i don't know... maybe that you can't fix debt problems with more debt.

the same thing that will continually happen until shit blows up.

Tue, 07/31/2012 - 12:08 | 2665337 Cranios

In answer to the headline here, I'd rather own stocks than bonds any day, when staring hyperinflation in the face.

Tue, 07/31/2012 - 12:10 | 2665345 SheepDog-One

Just cant have 'hyperinflation' when youve already bankrupted everyone.

Tue, 07/31/2012 - 12:11 | 2665350 Vaiman

Merkel Allies Harden Opposition to Granting Bank License to ESM as per bloomberg news

No matter....even though the Germans are shoving Draghi's words down his throat.......the markets now have their hopes in the Fed!! And even the majority of analysts agree the Fed will leave things as is. Real stubborn bunch of little bulls out there....refusing to surrender.

Tue, 07/31/2012 - 12:14 | 2665356 Mercury

Stocks trade on hope
Bonds trade on change

Tue, 07/31/2012 - 12:15 | 2665359 QuantumCat

A: Draghi's hot air can't lift PIIGS out of the profligate mud.

Tue, 07/31/2012 - 12:16 | 2665362 Arnold Ziffel

"As an immediate action to adjust the platform to the current environment, Deutsche Bank will reduce headcount predominantly outside of Germany by approximately 1,900 positions, including 1,500 positions in Corporate Banking & Securities and related infrastructure areas."

http://hereisthecity.com/2012/07/31/breaking-news-top-firm-announces-190...

Perhaps, house prices in The City and NYC will reflect this as uber-salaries correct back to reality.

Tue, 07/31/2012 - 12:23 | 2665378 Bastiat009

When two people disagree, they can't be both right but both of them can be wrong.

Tue, 07/31/2012 - 13:14 | 2665526 indygo55

Yeah but when two people always agree, you don't need one of them.

Tue, 07/31/2012 - 12:24 | 2665379 DavidC

Annoyingly(!), the 3 minute, 10 minute and hourly charts are each indicating oversold. Rally today as month end and then over?

DavidC

Tue, 07/31/2012 - 12:24 | 2665381 q99x2

Thank goodness the US has decoupled.

Tue, 07/31/2012 - 12:58 | 2665454 4exNinja

It only seems that way because it's election season. On paper the US aren't really off any better, they just benefit from having the dollar as the world's reserve currency...for now ;)

Tue, 07/31/2012 - 13:56 | 2665674 Vaiman

According to the statistics posted on Zero Hedge regarding how many US households are on foodstamps I'd say things are much worse. Of course the mainstream media won't mention that on the front page. It could affect their standing with the powers that be and El Presidente' Obama

Tue, 07/31/2012 - 12:27 | 2665385 mrfreeman

Mr Draghi, the world is watching expectantly. I know you won't fail us. (O omnipotent one).

But...everything risk does look a little bit overbought on the RSI charts, so if the fabulous banker boys disappoint...

Tue, 07/31/2012 - 12:25 | 2665387 Undecided

http://www.theglobeandmail.com/news/world/worldview/does-the-us-government-have-the-right-to-kill-its-own-citizens/article4451256/

does the U.S. government have the right to kill its own citizens?

Tue, 07/31/2012 - 12:31 | 2665408 francis_sawyer

Nowadays, they award 'Peace Prizes' for such acts of heroism...

Tue, 07/31/2012 - 12:32 | 2665409 Neethgie

Im not sure that PIGS bonds will give you the answer buddy

Tue, 07/31/2012 - 12:35 | 2665412 LawsofPhysics

Negative rates means that debt is now paying for itself. Yeah, this will end well.

Tue, 07/31/2012 - 12:59 | 2665461 pashley1411

Its just the other side of inflation.

The government has turned even "smart money" into sheep running from one side of the pen to the other, looking for a way to avoid the man with the axe.

Once the government learns to pay its way by printing currency and interest rates, anyone in currency is being bled white.

Tue, 07/31/2012 - 12:35 | 2665413 Neethgie

the market just wants to bull run at anything, reguardless of how improbable.

Tue, 07/31/2012 - 12:41 | 2665424 vinu02

PIIGS will chopped sooner or later. http://www.freefdawatchlist.com/

Tue, 07/31/2012 - 12:43 | 2665430 miker

ECB won't buy sovereign debt. Too obvious. They will buy through some convuluted path that will also allow them to prop equities.

This week.

Tue, 07/31/2012 - 13:37 | 2665619 1eyedman

ltro 2.5

Tue, 07/31/2012 - 12:57 | 2665450 alien-IQ

Shouldn't the headline be: "What does EVERYBODY know that stocks don't want to admit?"

Tue, 07/31/2012 - 13:05 | 2665485 magpie

Awesome, they pulled risk forward now they have to prop it longer...lets see how it ends.

Tue, 07/31/2012 - 14:14 | 2665741 shutupnsing

The City of Man

http://shutupnsing.wordpress.com/2012/07/31/the-city-of-man/

Wed, 08/01/2012 - 05:02 | 2667907 WaEver

Why would the bond markets be smarter than equity markets ? Weren't they massively buying AAA disguised crap at record low spreads. This market suffers the same problem : other people's money. as if a bond investor will buy and hold till maturity.....

What Do PIIGS Bonds Know That Stocks Are Oblivious To?

Comment viewing options