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.
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.
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…
Well, the time has come to put the money on the table. The problem is that the amount promised has to probably be multiplied by a factor of 3 to be enough to finance Greek budget deficit and refinance Greek public debt, to only subsequently result in an wasted time and money. Again, only principal […]
Markets still focus on Europe and in particular Greece. There are some rumors today that Unicredit and Deutsche bank have ceased to accept Greek government bonds as a collateral; there are also some rumors that the capital flight from Greece is reaching alarming levels. It looks the Greece story is approaching its climax and we […]
As I wrote yesterday: Can’t See The Forest For The Trees; the EU deficit and debt problems are far smaller than for the U.S., particular U.S. states, U.K. and Japan. Jean- Claude Trichet seems to agree. Bloomberg story: Trichet Struggles to Convince on Euro-Area Solidity. Still, Trichet said the “solidity” of the euro area “is […]
The market looks like today is just an intro. The 1.085 level broken, and technicians say the next target is 1.035 (I don’t believe in that, but since a lot of investors looks at that…). Beside bad initial jobless claims (480.000 vs. 455.000 consensus and 470.000 consensus) the main theme is PIIGS (Portugal, Italy, Ireland, […]