Holy Shitshow: Recordathon In French Bank, European CDS Following Atriocious Italian Bond Auction, Dexia Bail Out, Libor Explosion

As we speculated on Friday, Europe has opened, and it is ugly. In fact, Europe has never been closer to a bank and market holiday than it is right now. Why? Let's go down the list.

First, the French banks which are about to be downgraded any minute, have just seen their CDS surge to records:

  • BNP CDS +24 to 299 bps
  • SocGen CDS + 26 tp 416 bps, new all time record wide
  • Credit Agricole CDS + 25 to 315 bps, new all time record wide. Whoever followed our advice from last week and bought this latest jump congratulations.
  • And joining in the record party, are Belgium +25 at 307 bps; France +12 at 190; Italy +40 at 505; and Spain +44 at 445 bps. All new records

Next, Italy sold 91 Day and 1 Year bills, both of which came far worse than expected and this is despite the ECB buying this stuff up non stop.

  • Italy Sells 1-Year Bills to Yield 4.153% Vs 2.959% in August, Bid to Cover slides from 1.94 to 1.53
  • Italy Sells EU4 Bln of 3-Month Bills to Yield 1.907% Vs 1.034 last, Bid to Cover slides from 2.42 to 1.86

Lastly, Dexia, which we also discussed on Friday, was just implicitly bailed out. According to De Tijd:

The inner cabinet of the federal government Monday decided to Holding Communal jumping high urgently needed cash. The Dexia shareholder as his immediate obligations. 


The federal government decided late last week the ailing Municipal Holding 1 / 1 by the lifeline to throw 39 percent of the holding company for Astrid 40 million to take over. Astrid is the communication of the Belgian security services. 


Soon appeared a problem. Holding Communal Astrid had its shares already pledged to Dexia Bank in exchange for a loan of 48 million euros. Holding Communal, the largest shareholder of the Belgian group Dexia, with a stake of 14.1 proent.


Followed the weekend summit push, with a modified construction of the bus came. The inner cabinet bowed there Monday at 8 hours and carried on with the green light. Poured concrete, the federal government holding to 4.5 million immediately SFPI Monday, Holding Communal, in exchange for part of the Astrid shares. That gives the holding company breathing space and allows it to meet its immediate obligations. 


Later Monday morning meeting and the Holding Communal FPIM on the deal. 


SFPI would spend the rest of the amount (35.5 million) and Dexia Bank Belgium only pay the rest of the Astrid-shares, which it has pledged, releases. 


The deposit is extremely urgent, the water is the dome of the municipal Dexia shareholders on the lips. Holding Communal is already in bad financial paper. 


This is due to its strong dependence on the share price of the Dexia financial group. The holding company was in full support and financial crisis, Dexia borrowed before. As collateral for the loans they used Dexia shares. But now, their price has dropped sharply, the banks ask - - initially Fortis and ING - additional collateral. 


The holding should that "margin calls" within ten days 19.5 million euros available. Otherwise there is a cessation of payments. The holding company has pledged it all, so the only option is to bring cash as collateral. This requires that 40 million euros, or write it already 1 / 1 of 4.5 million, serve.

Lastly, Libor, which we have been following very dilligently, has literally exploded, meaning the Interbank market in Europe is now effectively shut down. From Bloomberg:

  • Credit Ag submits higher rates for sixth consecutive session as USD 3-mo Libor rises to 0.343% from 0.338% Sept. 9, highest since August 2010, BBA data show.
  • BNP Paribas 0.36% vs 0.35%
  • Credit Ag 0.41% vs 0.4%
  • SocGen 0.3575% vs 0.3525%
  • Bank of Tokyo-Mitsubishi 0.36% vs 0.35%
  • Bank of America 0.32% vs 0.31%
  • Citi 0.305% vs 0.3%
  • Credit Suisse 0.395% vs 0.3750%
  • Deutsche Bank 0.3% vs 0.29%
  • HSBC 0.26% vs 0.25%
  • Norin Bank 0.38% vs 0.375%
  • RBC 0.3125% vs 0.3075%
  • Scotia 0.315% vs 0.31%
  • Sumitomo 0.37% vs 0.365%
  • UBS 0.361% vs 0.359%


And there still is 3.5 hour of trading in Europe. Next up: halt in trading in all Italian bank stocks for a start, slowly migrating to all banks across the continent.


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