http://soberlook.com/2012/07/spains-cds-spread-racing-toward.html?utm_source=BP_recent
Spain's CDS spread hit a new record as well this morning - now at 645bp. Just to put things in perspective, Banco Santander (Spain's largest bank) CDS trades at 474bp and Banco Bilbao Vizcaya Argentaria (Spain's second largest bank) CDS is 492bp. Both trade tight to the sovereign. The market views the banks (who by the way rely on the ECB for most of their funding) as being financially safer than their government.
In fact Spain's CDS is pushing toward Portugal's levels as the perceived risks of these two nations begin to converge.
http://www.testosteronepit.com/home/2012/7/24/but-who-the-heck-is-going-to-do-all-the-bailing-out.html
and.......
http://www.telegraph.co.uk/finance/financialcrisis/9424923/Debt-crisis-Greece-to-run-out-of-money-by-August-20.html
http://www.acting-man.com/?p=18614
http://www.zerohedge.com/news/europe-smashes-all-market-records-its-way-total-insolvency
Submitted by Tyler Durden on 07/24/2012 12:00 -0400
Submitted by Tyler Durden on 07/24/2012 11:41 -0400
TUESDAY, JULY 24, 2012
Spain's CDS spread moving toward Portugal's
It's become the "new normal" watching Spain's yields hit new highs on a daily basis. It's an unsustainable process and Spain is now fully shut out from the capital markets.
Spain's CDS spread hit a new record as well this morning - now at 645bp. Just to put things in perspective, Banco Santander (Spain's largest bank) CDS trades at 474bp and Banco Bilbao Vizcaya Argentaria (Spain's second largest bank) CDS is 492bp. Both trade tight to the sovereign. The market views the banks (who by the way rely on the ECB for most of their funding) as being financially safer than their government.
In fact Spain's CDS is pushing toward Portugal's levels as the perceived risks of these two nations begin to converge.
 |
| Spain vs Portugal 5y CDS |
http://www.testosteronepit.com/home/2012/7/24/but-who-the-heck-is-going-to-do-all-the-bailing-out.html
But Who The Heck Is Going To Do All The Bailing Out?
TUESDAY, JULY 24, 2012 AT 1:02PM
Spain’s big banks are getting bailed out with €100 billion from the bailout fund EFSF. It won’t be enough, but it’ll buy time—a Eurozone mantra. Friday and Sunday, two of Spain’s seventeen heavily indebted regions, Valencia and Murcia, asked for a bailout from the central government. Today, it was Catalonia. Andalusia is still hoping to buy time. Other regions need to be bailed out as well, but the central government can’t bail out anything because it’s broke. It needs a bailout for itself and for its regions. A bailout far larger than any of the prior bailouts. Following the model, it will start with too little and then balloon.
The currently available bailout fund is the EFSF. It has a capacity of €440 billion. €192 billion have been committed to Ireland, Portugal, and Greece; €100 billion to Spain for its banks; and €10 billion may go to tiny Cyprus. Leaves €138 billion for Spain—and the rest of the Eurozone. Peanuts. Hence, the urgency to get the larger ESM off the ground (it’s tangled up in the German Constitutional Court).
In the EFSF, the top four contributors are Germany with 27.06%, France with 20.31%, Italy with 17.86%, and Spain with 11.87%. Combined, they're responsible for 77.1%. The other 13 Eurozone countries cover 22.9%. As bailed-out Greece, Ireland, and Portugal no longer contribute to the fund, the share of the remaining countries increases. So, the new load on Germany is 29.07% and on France 21.83%—combined over half!
Cyprus requested that it be allowed to step out of the EFSF, like its bailed-out predecessors. Though its contribution amounts to only 0.2%, German Finance Minister Wolfgang Schäuble, the lynchpin in all of this, nixed that request. If Cyprus wants to receive a bailout package, it would have to continue contributing its part to the fund—ironic euro nonsense, until you start thinking about Spain and Italy. If they get bailed out, their share, to be taken up by the remaining 11 Eurozone countries, would jack up Germany’s load to approximately 38% and France’s to 28%, for a combined 66%.
Alas, neither Germany nor France has any money. Every cent will have to be borrowed. The EFSF and the ESM are funded by their members, and by selling bonds. If Spain and Italy crater, 66% of those bonds would be guaranteed by Germany and France. Currently, the costs of borrowing are low for both countries, but once markets see that Germany will have to guarantee and perhaps pay 38% and France 28% of potentially a couple of trillion euros or more—that’s what it would take to bail out Italy—the costs of borrowing are bound to rise. Moody’s downgrade of its outlook on Germany was a hint.
There is a lot of handwringing in Germany about guaranteeing an ever increasing amount of decomposing Eurozone debt. Chancellor Angela Merkel tries to downplay it, but she can’t stifle the noisy grumbling from economists, bloggers, politicians, and even journalists.
But no one has yet explained to the French people what they’re getting into. President François Hollande hasn’t held a press conference on the huge tab. Bank of France Governor Christian Noyer hasn’t sounded any alarm bells about the suffocating debt and guarantees the French people are taking on through these bailouts. The government is too busy plowing through its honeymoon, raising taxes, and stepping on PSA Peugeot Citroën that wants to shut some plants to survive in face of double-digit sales declines.
The ESM, ingeniously, has language stipulating that bailed-out countries can’t stop contributing. Hence Schäuble’s refusal to let Cyprus off the hook on the EFSF. No more precedents! And that’s the irony. Germany and France can’t bail out 66% of the six debt-sinner countries, including Spain and Italy—they’re way too large. So language was inserted in the ESM that would force bailed-out countries to remain on the hook. For instance, if the ESM gave Italy €1 trillion—assume that it could do that, and that it would be enough—Italy would have to guarantee and perhaps pay 17.86% of that and Spain 11.87%. But they’re broke. They wouldn’t be able to pay, and their guarantees would be worthless. It’s a black hole.
Instead, Germany and France will end up with 66%, and in a worst-case scenario will have to eat it. People of both countries should be told! They should be reminded that these numbers get worse as more bailout candidates make the list. But that’s just theoretical. In reality, those funds can’t bail out Italy; its debt is too large. If Italy goes, so does the Eurozone—or the ECB will be tasked with printing whatever it takes (PWIT).
“The euro is irreversible,” said ECB President Mario Draghi as a whiff of panic was sweeping over the Eurozone, while Greece reached the end of the line. Read....Smashing The Can Instead Of Kicking It Down The Road.
and.......
http://www.telegraph.co.uk/finance/financialcrisis/9424923/Debt-crisis-Greece-to-run-out-of-money-by-August-20.html
9:29PM BST 24 Jul 2012
114 Comments
The beleaguered country will have to refinance billions of euros worth of government bonds in less than a month and requires international assistance — which may not be forthcoming — to repay the money.
International inspectors arrived back in Greece on Tuesday to assess the country’s austerity programme with European officials warning that it was “hugely off track”.
David Cameron is now receiving daily written updates on the deteriorating situation and was warned earlier this week that a Greek bankruptcy in the next month is now a serious possibility.
Official economic figures to be published today are expected to show that Britain suffered from a third successive quarter of negative economic growth — suggesting that the country is still in recession. If the figures are negative, it will be the longest double-dip recession for more than 50 years.
Ministers are expected to blame the continuing economic turmoil in Europe for this country’s failure to recover from the last slump.
One senior source said: “Europe is now paralysing almost every economic initiative.
“The daily analysis of the situation is filled with doom and gloom. Spain is in turmoil and Greece may run out of money by Aug 20.”
The crisis has dropped down the political agenda in this country, but behind the scenes it is still the major issue facing Whitehall officials and the Prime Minister as problems once again come to a head.
International Monetary Fund experts arrived back in Greece this week but may be reluctant to authorise the release of further funds to the new government without seeing evidence that the country’s austerity programme is progressing.
There are also growing fears that Spain will soon need a full-scale bail-out after its government borrowing costs rose above seven per cent this week. Reports in Spain on Tuesday said the country had not ruled out leaving the euro.
The cost of Italian borrowing has also risen to the highest level since Mario Monti took over from Silvio Berlusconi as the country’s prime minister last autumn.
On Tuesday, credit ratings agency Moody’s warned that it may cut the creditworthiness of Germany amid renewed concerns it will have to bail out southern European countries.
The eurozone crisis is entering a dangerous new phase as most European leaders are preparing for lengthy summer breaks. Mr Cameron is expected to be on holiday on Aug 20 and now faces the prospect of a second successive interrupted summer break.
On Tuesday, Ed Miliband, the Labour leader on a visit to Paris to meet François Hollande, the new French President, suggested that an emergency European summit may be necessary.
Mr Miliband said: “I think it is very, very important for countries to work together not just at each summit but between summits. It is a grave and urgent situation we are seeing in Europe and it can’t simply wait until the next summit in October.”
Spain is now widely expected by City experts to require a full-scale international bail-out, following the recent assistance offered to its banks. “It’s a desperate situation they’re in and markets are slowly closing to them so I don’t think there’s much doubt they’ll need an international package at some point soon,” said Robin Marshall, a director of Smith & Williamson Investment Management.
European officials said yesterday that a visit to Greece by international inspectors was likely to conclude that the country was unable to repay its debts, despite a previous restructuring programme. The IMF and EU are likely to face trying to renegotiate the deal with Greece, a move likely to be resisted by some countries.
“Greece is hugely off track,” said one European official. “The debt-sustainability analysis will be pretty terrible.”
"
Nothing has been done in Greece for the past three or four months .... the situation goes goes from bad to worse , and with it the debt ratio.
http://www.acting-man.com/?p=18614
Mario Draghi and Benoit Coere Try to Dissuade Speculators
ECB chief Mario Draghi and ECB board member Benoiut Coere both were out warning speculators yesterday not to 'bet on a demise of the euro'. Unfortunately one feels fatally reminded of Jean-Claude Trichet's famous dictum of late July 2011:
“Speculating on Greece defaulting is a sure way to lose money, European Central Bank President Jean-Claude Trichet was quoted as saying in remarks released on Wednesday."Such a speculation would be a sure-fire way of losing money given the decisions taken last Thursday,"
Well, we all know how that one turned out, don't we? Reuters now reports that Mario Draghi says that the 'euro is not in danger'. If the euro is not in danger, then what is it?
* * *„The euro zone is not in danger of breaking up despite some analysts' worse [sic, ed.] case scenarios, European Central Bank President Mario Draghi said, judging that the bloc was inevitably marching towards closer union among its members.Asked in an interview with French newspaper Le Monde if the euro were in danger, Draghi said: "No, absolutely not. We see analysts imagining the scenario of a euro zone blow-up." "They don't recognize the political capital that our leaders have invested in this union and Europeans' support. The euro is irreversible," he added.In the long term, the euro would need to rest on a foundation of greater integration among euro zone countries, Draghi said."All movement towards financial, budgetary and political union is for me inevitable and will lead to the creation of new supranational bodies," he said.European leaders took a step towards greater integration last month at a Brussels summit where they agreed to put the ECB in charge of supervising banks and gave the ESM rescue fund the power to recapitalize troubled banks.However, the summit provided only brief relief to investors. Concerns about Spain have returned to the fore, driving the country's 10-year bond yields above the 7-percent danger level on Friday. European and U.S. stocks also fell and the euro hit record lows against the Australian, Canadian and New Zealand currencies in the face of increasing investor fears that the Spanish government may seek a full-blown bailout.Draghi poured cold water on the prospect that the ECB could take action to calm the situation, saying that its mandate did not allow the central bank to resolve states' financial problems. The International Monetary Fund has urged the ECB, which is legally forbidden from financing governments, to play a greater role fighting the crisis, suggesting that it could be given lender-of-last-resort functions.At the summit in June, EU leaders broadened the ECB's role to include supervising banks in hope that the move would cut the risk that troubled lenders' problems could spread to sovereign borrowers.“
(emphasis added)
Spain's 2 year note yield explodes – the massive flattening of the Spanish yield curve over recent days indicates that investors are now placing a very high probability on a full-scale bailout or default of Spain - click for better resolution.
Allow us to note that it is not the troubles of the lenders that are spreading to the sovereigns, it is actually the other way around. Or let us rather say it has become feedback loop, mainly caused by the idee fixethat all banks must be bailed out under any and all circumstances.So Draghi, a supreme EU bureaucrat is threatening us with the creation of a European superstate? Surprise! Perhaps we should call it the Super Mario Superstate. This is of course precisely the agenda that has already been openly discussed by eurocrats on many occasions, for the first time in what today seems a distant, untroubled past.
Former EU president Romano Prodi, an Italian socialist, admitted in a 2001 interview to the Financial Times that the euro was probably unworkable and that not all the centralization measures he and other centralizers would have liked to implement had been put in place. However, so Prodi at the time, one day a crisis would come along and make it all easily possible.
That may have been a miscalculation. It matters little how much 'political capital' the elites have 'invested' in the euro project if it turns out to be a major malinvestment. If the economy falls apart and there are riots in the streets, their commitment is certain to waver. For reasons we discussed previously we actually happen to think that the euro is slightly superior to other fiat currencies, always provided the rules are adhered to. At least it is not so easy to inflate one's way out of trouble with the euro than it is with other fiat monies. The problem always has been, and continues to be, whether hanging on to it will be politically doable. It increasingly looks like that will not be the case.
Draghi rightly mentions that the ECB 'cannot put out all fires', but the fact is that there are really only two possibilities for the peripheral countries: the hard way (austerity and internal deflation) or the – seemingly painless – route of inflation. Of course the latter policy will lay the foundation for an even bigger bust down the road, but it is what the global elites and their advisors keep telling us is the 'only way'.In fact, we suspect that if not for Germany's and the Bundesbank's reluctance, the ECB would have thrown its rulebook out of the window long ago. This reminds us that German economist Hans-Werner Sinn recently penned a well-reasoned jeremiad against the bailout policy, which was signed by 180 other German economists. This resulted in a media campaign against Sinn, who is now basically denounced as the euro's grave digger. One must also not forget, the EU and the euro area both are a Nirvana for interventionist macro-economists. Their services are in great demand and one must assume that they get paid well above their market value. It is no wonder that a number of them are manning the barricades in favor of the bailout policy. However, the deteriorating social mood across Europe will likely put paid to all these policies in the end, no matter how vigorously they are defended by the statist elites.
Italy's MIB stock index in Milan – back at the 2009 crash low - click for better resolution.
ECB Board member Benoit Coere had this to say according to Reuters:„The euro zone political commitment to the euro should not be underestimated, European Central Bank Executive Board member Benoit Coeure said on Friday in a warning to those doubting the single currency's survival.In a speech in Mexico City, Coeure said there was a lack of understanding about the euro zone's approach to tackling the debt crisis and that he disagreed with those who said the bloc did not have the right tools to fix the situation."I would caution those who have doubts about the euro, that they underestimate the political commitment to it at their own risk," Coeure said. "The ambition to provide long-term foundations for EMU in less than a decade is a historical step of great significance," he added.He added that the euro zone would remain a cornerstone of the international economy and that euro zone leaders had "clearly understood that the time of partial solutions and piecemeal reform is over".He underscored the bloc's decision to give the ESM permanent bailout fund the ability to capitalize banks directly, a move he described as "crucial to break the vicious circle between banks and sovereigns that is at the heart of the crisis".In addition he said short-term measures were clearly needed to help growth and soften the blow from austerity.“(emphasis added)There it is again: the political elites are committed to the euro, and therefore, it allegedly cannot fail. As to what the 'leaders of the euro-zone have clearly understood now', that can only have been meant as a joke to enliven his speech a bit. Not only remains reform 'piecemeal', it isn't the right kind of reform anyway. They haven't even correctly diagnosed the problem yet, so how can there be effective reform?
It may be 'crucial to break the vicious cycle between banks and sovereigns', but unfortunately it isimpossible – unless defaults are allowed to happen. The banks have been told by regulators for years that sovereign debt holdings didn't require any capital to be set against them, as they are supposedly 'risk free'. The outstanding mountains of debt by the likes of Italy (nearly €2 trillion) won't go away – someone is always holding the debt, and as far as we are aware, European banks e.g. hold some €1.2 trillion of Italy's debt. There is no conceivable scenario in which the interdependence between banks and sovereigns in the fiat money system can possibly be disentangled. Moreover, many euro area banks also hold large amounts of European shares – which are collapsing in value as well.
With two central bank eurocrats coming out on the same day swearing up and down that the euro is 'irreversible' and cannot possibly fail, it would probably make sense to start betting not on if, but on whenit will fail.
The 10 year government bond yield of Spain – above 7.5% as of Tuesday - click for better resolution.
Madrid's IBEX index, long term. This index has already fallen below its 2009 crash low. A very ominous chart indeed - click for better resolution.
If you are wondering what path the IBEX or the MIB are likely to tread over the next several years, consider a long term chart of the Nikkei's bear market, which may well provide us with an approximate road map.
Japan's Nikkei since the bursting of the 1980's bubble. This is by now almost the mother of all bear markets (but it is still bested in extent and duration by the 68 year long bear markets in the UK and France following the South Seas and Mississippi bubbles). Still, in modern times, this is a bear market of unprecedented severity and longevity. We happen to think it also represents an opportunity – we will discuss this in a future post. For now, the Nikkei may well serve as a rough road map for the euro area's bear markets in stocks - click for better resolution.
What 'Austerity'? Euro Area Government Debts Keep Rising
Euro-Stat reported yesterday that the euro area-wide public debt-to-GDP ratio has reached a new high of 88.2% of GDP. Always keep in mind that the 'Growth and Stability Pact' imposes a 60% limit and that there are outliers like Estonia which sports only a 6% of debt-to-GDP ratio and Greece which currently boasts of a 132% debt-to-GDP ratio – which by the way represents a huge 33% decrease from last quarter.
Public debt-to-GDP ratios of all countries in the EU. Legend: EL=Greece, IT=Italy, PT=Portugal, IE=Ireland, BE=Belgium, FR=France, EA17=euro area, UK=UK, EU27=EU total, DE=Germany, HU=Hungary, MT=Malta, CY=Cyprus, AT=Austria, ES=Spain, NL=Netherlands, PL=Poland, FI=Finland, SI=Slovenia, SK=Slovakia, DK=Denmark, LV=Latvia, SE=Sweden, RO=Romania, LU=Luxembourg, BG=Bulgaria, EE=Estonia - click for better resolution.
Debt-to-GDP ratios increased in 21 of the 27 EU nations over the last quarter and declined in just six of them. Apparently the need to tighten belts is not really taken very seriously just yet, with the exception of the nations already under the bailout umbrella (and even among those only Greece managed to actually lower its debt-to-GDP ratio). The six outliers were Denmark, Germany, Estonia (so the country with the by far lowest debt-to-GDP ratio lowered it even further), Sweden, Hungary, and Greece.
Spain's Growing Troubles and Short Selling Bans
Meanwhile, market worries over Spain's situation intensified markedly on Monday as altogether six regions are now deemed to be in need of a bailout, with the cost likely to exceed the originally planned €18 billion by a big margin. Spain's economy shrank by 0.4% last quarter, which was 'worse than expected' and also contributed to the somber mood. The troubles of Greece weighed on markets as well and bond yields and CDS spreads of the peripheral sovereigns shot up as a result, while 'risk assets' slumped all over the world. Shorter term issues of so-called 'safe haven' bonds in many cases saw their effective yields to maturity dive deeper into negative territory.“Spain’s bonds slumped, with 10-year yields rising to a euro-era high, on speculation more regions will follow Valencia in asking for financial aid, increasing concern the country will need a sovereign bailout.Germany’s bonds outperformed their euro-area peers, with two- and five-year yields reaching record lows, as Der Spiegel magazine reported the International Monetary Fund will stop paying rescue funds to Greece, citing unidentified European Union officials. Italy’s 10-year yield climbed to a six-month high and Greek bonds tumbled. German 30-year bunds are forming a bubble, according to Carl Weinberg, founder and chief economist of High Frequency Economics.“The probable bailouts of some Spanish regions is weighing on markets and pushing up yields,” said Craig Veysey, head of fixed income at Principal Investment Management Ltd. in London, part of Sanlam Group, which manages $72 billion. “There is concern that Spain might be looking for a sovereign bailout sooner rather than later as a result of having to bail out the regions. Yields at current levels aren’t viable.”
[…]Spanish bonds also declined after central bank estimates showed the euro area’s fourth-largest economy shrank 0.4 percent in the second quarter from the previous three months.Spanish two-year yield climbed 77 basis points to 6.53 percent after surging as much as 99 basis points, the biggest intraday gain in the euro era.“Spain would need a bailout if yields stay where they are for another couple of months,” Georg Grodzki, head of credit research at Legal & General Investment Management Ltd. in London, which manages $596 billion of assets, said in an interview on Bloomberg Television’s “On the Move” with Francine Lacqua.Italy would then be “an open target for the next wave of attacks,” he said.[…]Germany’s 10-year yield fell as low as 1.127 percent, matching the June 1 record, before being little changed at 1.18 percent. The two-year yield was at minus 0.06 percent, below zero for a 12th straight day, after declining to a record minus 0.080 percent.
(emphasis added)
Germany's two year yield: sliding deeper into negative territory - click for better resolution.
The cost of bailing out Spain's regions has recently been estimated to be up to €24 billion, far more than the €18 billion originally budgeted. It is increasingly difficult to see how Spain can actually finance such a huge bailout on its own, especially as such estimates tend to be moving targets – very fast moving ones in fact, similar to the losses of the banking system (to wit, the move from the €18 billion to the €24 billion estimate essentially took place over a single weekend).One side effect of all these bad news hitting the markets was that bank stocks in Spain and Italy once again went into free-fall, with trading in several stocks in Italy halted intermittently during the day. Italy's and Spain's financial regulators didn't wait long to deploy measures to keep people from protecting their portfolios by once again enacting short selling bans. Such bans are not only completely ineffective, they are in fact counterproductive. Italy banned the short selling of financial stocks, while Spain actually went as far as banning short selling altogether.We should perhaps mention here that when the NYSE last enacted a market-wide short selling ban in February of 1932, the Dow Jones Industrial Average collapsed by over 65% in the following four months. Readers may also recall that that short selling ban on financial stocks put in place by the SEC in 2008 preceded the crash by about one or two weeks. The bans in Italy and Spain should be regarded as what they are: yet another negative factor that will lower market liquidity and hasten the downfall of their stock markets, as there will no longer be any short covering after the initial flurry has subsided.What keeping people from expressing a market opinion is supposed to achieve may be held to be slightly mysterious, unless one considers the real reason behind such bans.
The share price of Italy's largest bank, Unicredito. There have been several short selling bans on the way down. Not one of them kept the stock from falling further - click for better resolution.
Intesa de San Paolo, Italy's second largest bank. Investors can no longer hedge themselves by shorting the stock, but the stock's collapse has not been hindered in the least - click for better resolution.
We suspect regulators enact short selling bans partly out of spite and partly because it makes it appear as though they were 'doing something'. In the main though the bans create the entirely false impression that short sellers are somehow to blame for the collapse in bonds and stocks.This is after all the propaganda story the eurocrats have been desperately trying to sell ever since the crisis began: evil speculators are on the attack and must be thwarted. It is not the fault of profligate governments, the overextended welfare state or the fiat money system enabled credit bubbles that the prices of securities are now under pressure. No, it is speculators who are to blame, especially short sellers. This is utter tripe, but many people actually seem to believe it (recently a member of the Austrian Green Party defended her decision to vote in favor of ratifying the ESM by saying – we are paraphrasing: “we are in a special situation, with speculators attacking government bonds, and we must fight them. That's why we need the ESM”).
“Banning short selling must be to a regulator what the Sirens of Greek lore were to sailors: incredibly irresistible despite the damage these temptresses wreak. Spain on Monday said it would ban short sales of stocks for three months, while Italy’s ban was only for the financial sector and for one week.The logic is there on the surface for both those moves. Spain’s Ibex has dropped 29% this year, and Italian financial stocks have dropped by 27%. Ouch!Banning shorts of course triggers an immediate upturn, as hedge funds and others betting against all these companies buy the securities to close out their negative bets. (They are by law permitted to keep the positions, but many close out their positions, as Monday’s price action showed.)But beyond that one-day move, short-sale bans have lasting negative impacts. As discovered during the U.S. financial crisis, short-sale bans don’t prevent stocks from going down; moreover, they also take liquidity away, and that diminished volume increases the bid-ask spreads.They also make investing more risky and volatile. Here’s one comprehensive study that shows just how damaging these bans are. See external link to short-sale ban study.”
(emphasis added)Well, never mind that the bans fly in the face of logic and that both history and academic studies show that they tend to have the opposite effect of that intended: let's do it anyway because we can! This is a folly on a par with the 'financial transaction tax' that many eurocrats insist is currently so important to implement. It is the modus operandi we have come to expect: the causes of the crisis remain untreated, while the symptoms are attacked with great vigor by unsuitable means that as a rule only tend to worsen the crisis further.
Italy's 10 year bond yield – back above 6.5% - click for better resolution.
http://www.zerohedge.com/news/europe-smashes-all-market-records-its-way-total-insolvency
Europe Smashes All Market Records On Its Way To Total Insolvency
Spain's IBEX equity index closed at Euro-era lows today having dropped over 10% in the last 3 days (crushing the hopes of the afternoon post-short-sale-ban squeeze yesterday). This leaves IBEX down over 30% for the year (and Italy down over 18% YTD). Add to that; inverted long-end curves in Spain (and almost Italy), all-time record high short- and long-term spreads for Spanish debt and euro-era record high yields, record wide CDS-Cash basis, dramatic short-end weakness in Italy, new low negative rates in Switzerland (-46bps) and Germany (-7bps), and EURUSD at its lowest since June 2010 at 1.2059. But apart from that, the EU Summit seems to have done the trick nicely. Financials have been crushed in credit-land as subs notably underperform seniors and HY and IG credit continues to lead the equity markets lower in reality. Meanwhile, remember Greece?30Y GGBs have dropped almost 20% in price in the last few days and have closed at all-time record low closing price at just EUR11.55!! S'all good though - where's Whitney?
You've seen enough Spanish charts - you nasty rubber-neckers...
So here's Italy's 5Y Bond spread to bunds...
and Greek Bond PRICES...
and European equity indices post EU Summit..
Charts: Bloomberg
and........
http://www.zerohedge.com/news/troika-says-greece-needs-another-debt-restructuring-round
Troika Says Greece Needs Another Debt Restructuring Round
It has been a while since Greece made the front pages. That changes now:
- GREECE SEEN MISSING EU/IMF DEBT REDUCTION TARGETS, FURTHER DEBT RESTRUCTURING NECESSARY - EU OFFICIALS
And to think all those knife catchers said the Greek bonds were the slam dunk trade of the year. All of them are about to get taken to the cleaners. As are their newsletter sales.
and.......
http://www.guardian.co.uk/business/2012/jul/24/eurozone-crisis-germany-moodys-spain-auction
THAT'S ALL, FOLKS
Here's a closing summary of another lively day in the euro crisis.
The eurozone has been shaken today by rating agency Moody's threat to downgrade Germany, the Netherlands and Luxembourg.Moody's warned overnight that all three AAA nations are at growing risk from a Greek exit from the euro, or a bailout for Spain and Italy. All three countries are now on negative outlook.
City analysts believe that Europe will be hit by a swathe of downgrades in the months ahead, unless real progress is made in fixing the crisis soon.
In another nervy trading session, Spanish and Italian government bonds slid again. Spain's 10-year bond yields hitting new record highs over 7.6%, and Italy's yields at new highs for 2012.
Spain was also forced to pay higher borrowing costs at an auction of short-term debt, but there was relief that it raised the €3bn it needed. Reports that Catalonia had caved in and applied for a bailout from Madridwere denied.
Fears over Greece's future in the eurozone were heightened after Reuters reported that EU officials fears that Athens will need another debt restructuring deal.
The weakness of the eurozone economy was underlined by new PMI data showing that its private sector is shrinking again this month. This included surprisingly weak surveys from Germany.
In Berlin, there were more signs that German politicians have lost patience in Greece. However, there was also a backlash against PhilippRösler, for claiming over the weekend that a Grexit was manageable. Greek PM Antonis Samaras led the way, attacking EU officials forattempting to sabotage Greece.
And the day finished with a flap in Brussels over a statement from the Spanish government, declaring that Spain, Italy and France stood shoulder-to-shoulder in calling for rapid action. Just one small problem - Italy and France didn't agree.....
Interesting times. And tomorrow we get new GDP data for the UK, which will show if Britain is still in recession. On top of all the latest events in euroland. See you then! Goodnight all.
Updated at 19:21 BST
Whether it’s panic, disingenuity, or another Club Med plot to bump
Anglea Merkel into concessions, the Spanish have sown confusion in
Brussels today, announcing and then withdrawing a tripartite call by
Spain, Italy and France for swift eurozone action on the decisions of
last month’s summit.
Anglea Merkel into concessions, the Spanish have sown confusion in
Brussels today, announcing and then withdrawing a tripartite call by
Spain, Italy and France for swift eurozone action on the decisions of
last month’s summit.
Ian Traynor, our Europe editor, reports:
This is the fourth attempt in little more than a month by the three countries to ambush the Germans - first at Los Cabos in Mexico at a G-20 summit (in cahoots with the Brits and the Americans), then at a summit of the three countries plus Germany in Rome last month followed shortly thereafter by the EU summit in Brussels.The Spanish foreign ministry issued a press statement saying that the Europe ministers of the three countries at a meeting in Brussels today demanded prompt implementation of the summit decisions, meaning the call to break the link between weak banks and weak sovereigns and shifting to direct eurozone recapitalisation of Spanish banks.The problem is that the French and the Italians have denied any such common statement. The Spanish statement was wiped from the ministry website. It may be a major gaffe. Then again...
and......
http://www.telegraph.co.uk/finance/debt-crisis-live/9422024/Debt-crisis-as-it-happened-July-24-2012.html
15.03 Mr Monti's remarks came as mayors from across Italy marched in front of the Italian senate against planned austerity measures.
Andrea Marchi, mayor of Ostellato, told AFP: "We have reached our limits".
Rome's Mayor Gianni Alemanno, right, delivers his speech as he gathers with Mayors from across Italy to protest against spending cuts planned by the Government, in Rome on Tuesday (Photo: AP).
14.59 The Italian government is to oversee spending cuts in the crisis hit region of Sicily. Following a meeting between PM Mario Monti and Sicilian governor Raffaele Lombardo this morning, Mr Monti said in a statement:
[We have agreed] a plan for financial recovery and reorganisation of the regional public administration [that will be] constantly monitored by the technical institutions of the national government.
