Spanish sovereign bond spreads blew almost 60bps wider today - that is the single-largest absolute move in spreads on record. Almost the entire gain in bonds post-Draghi 'Believe' speech from last week has been retraced in a mere few hours and while the front-end of the Italian and Spanish curves has outperformed, the sad fact is that in promising to maintain that end, then the entire rest of the curve becomes subordinated and therefore is sold as hope fades. Swiss, German, and Dutch short-dated bond yields all dropped to new record low rates. EURUSD has retraced its entire gain from Draghi-'believe', back to 1.2150 - despite his call not to short the EUR. Equity markets in Europe has dumped across the board today - with Italy and Spain -7% from pre-Draghi this morning - though notably still full of some hope from last week. It would seem that perhaps Mr. Draghi should keep his arrogant mouth shut a little more as we thought price stability was his mandate? The largest rise in EGB yields in a decade - all on the back of his misguided and over-confident egotistical attempt to jawbone markets to his reality. All mouth; no trousers.
Spanish bond spreads rose the most on record today...
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as the entire gain from the Draghi 'believe' speech is gone...
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and EURUSD has retraced the entire gain also...
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but European stocks remain well above pre-Draghi-believe levels - despite a huge dump today...
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as credit is leading us lower (but clearly stocks still 'believe' a little)...
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It would appear to us that all those who 'believed' and bought and dreamed of times greater than this as we turn the corner on the Europe debacle will be just as dismally disappointed and dismissive of any future 'promises' as some of the more skeptical among us. If not, then we remind them - when you sit at the table and can't tel whop the sucker is - it's you!
Charts: Bloomberg