Global Macro Perspectives
Looks like meltdown is averted; ECB will probably announce further bond purchases on it’s tomorrows Governing Council meeting.
Portugal managed to sell €500 of 12-month bills at bid-to-cover ratio of 2.5 times despite S&P negative credit watch issued yesterday.
Waiting for another ride in a few months…
Spain, Italy and Ireland at new record highs. Markets in panic mode.
I don’t see any other way how this could be reversed (meltdown prevented) except ECB bond purchases.
Nothing surprising here. The program announced is in the middle of speculated €70-€100 billion range.
The interest rate (if facility would be drawn now) is at 5.8%.
All this looks so futile, it is almost impossible for Irish economy to grow with this kind of austerity and interest rate burden.
Spain 10 year government bond spread vs. it’s German peer reached new high of 255 bps. Irish bond spread reached record high of 654 bps.
Markets have lost faith in EU bailout plan and are now finding out (again) that math is quite exact science. CNBC Europe has even sent it’s anchor to Lisbon to provide live coverage of Portugal bailout; they were wrong: the markets skipped Portugal and moved to big story – Spain. Spain has a funding requirement of at least €155bn in 2010. Looks intimidating, especially if we took to account the fact that Ireland was pre-funded for the first half of the 2011 and despite that needed a bailout.
This puts the markets near the point where the only solution is the Ben Bernanke way – buy worthless paper and stuff cash in monetary system. I would do it fast, but I doubt on EU leadership determination. In any case, more the ECB waits the situation will get worse.
The country is in the process of being bailed out and they have an A rating on it?
And we have a second EU bailout.
It appears that Ireland is moving closer toward some kind of bailout. It is clear that Irish government want to keep some kind of fiscal independence and shift the focus toward bank problems, not country problems…
While we wait to see whether Ireland will be bailed out today I’ll post todays interesting reads…
Spreads tighter…
I’ll interrupt my blogging silence with a short update on markets. Usual service continues as scheduled on Monday.
Looks we have trading themes reversing course.
Market summary: Shanghai down; U.S. Dollar up; PIGS spreads record wide…
Irish spreads reached a new high today an German demands of determining a burden sharing plan on any future bailouts. In short Germany refuses to underwrite all of the peripheral Europe new debt. This raised some restructuring talk in the markets. In the mean time Ireland is working on a 2011 budget, it remains to be seen whether they can bring […]
Moody’s lowered Spain to Aa1 from Aaa with a stable outlook. This was widely expected, Spain bond spreads narrowed. Bloomberg story: Spain’s Credit Rating Cut One Level to Aa1 by Moody’s. Ireland bank rescue price tag was estimated at USD 68 billion or 32% of Ireland’s GDP. Bloomberg story: Ireland Faces $68 Billion Bank Rescue to Prop Up Allied, Anglo. […]
Irish spreads again a bit higher today. Irish government will announce tomorrow the details of Anglo Irish burial rescue. So far the bank has received EUR 23 billion of state help, tomorrow will be added additional EUR 10-15 billion. Incidental tomorrow marks two years of Irish government guaranteeing Anglo Irish debt and the guarantee is not (jet) extended. So, there is a possibility that some EUR 5.7 billion […]
Irish 10 year government bond yield spread versus same maturity German moved to new record high today. European markets resemble roller coaster ride today, having fallen post opening and paring losses after some verbal intervention from ECB officials. Irish story is starting to more and more look like Greece earlier. Chart 1. Ireland vs. Germany […]
Moody’s just downgraded Anglo Irish senior unsecured debt by three notches (A3/Prime-1 to Baa3/Prime-3) and subordinated debt by six notches (Ba1 to Caa1). Irish spreads unchanged at Fridays record highs. Downgrade (as usual) when the market price has already ran its course.