In yet another 2011 déjà vu moment, Europe’s bank funding window is slamming shut again (the catalyst that brought the 2011 Euro crisis vintage to its heights). Nowhere is this more evident than when comparing monthly debt issuance in the first 4 months of 2012 to the previous two years. Sadly, even despite taking place while the LTRO effect was front and center, Europe still was unable to match prior year debt. Fine, the skeptics will say, this simply means that there is less debt maturing and thus less need for new issuance… And the skeptics would be wrong. As charts two and three demonstrate, this is broadly correct for only 4 countries, of which 3 still have their own currencies (coincidence). The balance is a sorry sight, with Germany, Spain and Italy seeing nearly EUR100 billion in net unrolled redemptions just Year to Date alone! As UBS very poignantly points out, “It is difficult to see this as anything other than contagion from the latest variant of the euro crisis.”
Total debt issuance YTD 2012 and compared to 2010 and 2011:
Total YTD debt issuance by country:
And debt issuance net of maturities:
So as the contagion tsunami once again rises to its summer-time crescendo, the market will be quite curious which banks provide the best target practice in a world where suddenly shorting European banks is once again allowed (for how much longer we wonder). And once again courtesy of UBS (which is quite happy to present other banks’ dirty laundry in a smart redirection effort punctuated by the following footnote: “Note: data on UBS is publicly disclosed”) we show readers which banks have once again lost all capital markets access and are most heavily reliant on the ECB as a “key component of the financing structure”
ECB is the primary liquidity lifeline in absolute terms for the following banks:
[6]
Same in relative terms, as a % of funded assets.
[7]
To the banks mentioned above, we just want to say ‘no hard feelings’: we leave you with UBS’ conclusion on what is certainly inevitable, and will allow you to kick the can down the road at least one more time as y’all get bailed out one more time.
We see a significant possibility of the need for further ECB intervention in coming weeks and months to provide extra funds the financial system and sovereign in Spain, while the debate over banking reconstruction takes place… The market is unlikely in our view to provide the authorities the time to deliver solutions without further official support.
Translated: expect the next Euro-contagion peak within the “coming weeks and months.”