http://www.guardian.co.uk/business/2012/apr/19/eurozone-crisis-spanish-auction
And it's another day of heavy losses on the Spanish stock market, with the IBEX 35 now down another 1.3%, or 97 points, to 6981.
This is the first time the index (which is dominated by bank shares) has been below the 7000 mark.
Louise Cooper of BGC Partners warns today that Spain's banking sector is in a dire state, making an eventual Spanish bailout highly likely:
At the start of this financial crisis, the Spanish banking industry was regarded as being protected by superior local regulation and supervisory control- shares in the Spanish banks did perform better than other European banks for the initial years of the crisis. But we didn't know the real situation, now we do, or are beginning to suspect....Year to date shares in the two biggest Spanish banks are down sharply – Banco Santander is down 16% and BBVA down 22%. Over the same period, the Eurostox600 banking index is actually up a couple of percent.
So if you believe that this is a story of catch-up growth being given back, then Spain will inevitably follow the others into a bailout.In the last few minutes the euro has begun sliding sharply, hitting a low of €1.3078 (down nearly a cent on its earlier highs).
Another worry is that German bunds have just surged to a new record high. That has pushed the spread between German 10-year bond yields and the French equivalent to its widest point since January....
Just trying to work out why....
Just trying to work out why....
The prospect of fresh aid for Spanish banks was raised, and dismissed, at the European Commission's regular media briefing in Brussels.
EC spokesman Olivier Bailly told reporters that there are still "no plans" to use the European Financial Stability Facility , or its replacement the European Stability Mechanism, to pump new capital into the Spanish banking sector.
Such a move would only happen if the EC reckoned that a banking sector could not recapitalise itself through the equity markets, or through a bailout from its national government, Bailly explained, adding:
This is not the case for Spain. This is not necessary for Spain, we believe.
Bailly's optimism is not mirrored in the financial community, though. Analysts point to the huge, unquantified, levels of bad debt on the books of Spain's banks following the (ongoing) property slump. Carsten Brzeski of ING has estimated that €80bn might be needed to clean up the mess.The Spanish government could provide the funds itself, taking stakes in retail banks in return for cash injections. But as its own borrowing needs are so great, that might push Madrid to the point of needing its own bailout....The latest opinion polling from Greece is rather interesting – it suggests that the two main parties could manage to win a wafer-thin majority between them after next month's election.The survey, conducted by polling group, found that the right-wing New Democracy party would win 110 seats, while the socialist PASOK party would hold onto 41. With 300 seats in the Greek parliament, that would give the two parties a majority of just 1 seat -- assuming that they could form a coalition.An ND-Pasok coalition is the 'best-case scenario' the European establishment, really, as both parties support Greece's current financial aid plan.The poll also found that many of Greece's smaller parties enjoy solid support. With New Democracy and Pasok winning just 37% of the vote in total, another eight parties would win at least 3% of the vote - enough for at least one seat under Greek election rules. Seven of those parties say they oppose Greece's current austerity plan.
Yusuf Heusen, sales trader at IG Index, reckons this morning's Spanish auction was a "damp squib", because the results contain something for both optimists (plenty of debt sold, strong demand) and pessimists (higher yields).He adds:Regardless of today's sale, Spain remains the country to watch, given its size and the steady deterioration in both its banking system and economic situation.
Here's some early reaction to the auction:Peter Chatwell of Credit Agricole:It's a mixed auction. From the treasury's perspective, it is good, selling the maximum amount…but, given the market volatility, I would not read too much into this. It's job done for this round.Marc Ostwald of Monument Securities:
The most encouraging part is they sold more of the 10-year than they did of the two-year…What does it tell us? Well, they got over this hurdle and the next one is not far away.Nicholas Spiro of Spiro Sovereign Strategy:This week's Spanish auctions were a relative success, but this may be a temporary reprieve more than anything else.And Spain's long-term problems are not solved by one or two debt auctions, of course. Unemployment is still painfully high (over 23%) and the country is still heading into a deep recession this year..... as Sony Kapoor of the ReDefine thinktank pointed out on Twitter:
No comments:
Post a Comment