Cyprus Applies for Bailout

It was already known last week that Cyprus would need a bailout as well and it has now officially become the fifth nation to apply for one. Once again a bank needs to be saved. Somehow, Fitch appears to have gotten wind of this as well, as it once again proved how timely and swiftly it can react to new developments on the credit front by downgrading Cyprus about five minutes before its bailout application was delivered in Brussels. Holders of Cypriot bonds be forewarned! Something might not be right down there!

 

„The Cypriot government has issued a statement confirming that it has officially made an EU bailout bid, citing heavy exposure to debt-stricken Greece. This makes it the fifth state within the currency union to ask for help.

The request comes just days before a deadline to recapitalize one of the country’s largest banks.

“The purpose of the required assistance is to contain the risks to the Cypriot economy, notably those arising from the negative spillover effects through its financial sector, due to its large exposure in the Greek economy,” the government's statement said.

Government spokesman Stefanos Stefanou wouldn't reveal how much Cyprus would ask for, saying the amount is subject to negotiations. The 27 EU leaders are meeting in Brussels on Thursday and Friday, where the subject will be discussed.

Analysts estimate the sum is likely be around €5 billion ($6.2 billion), but could be as high as €10 billion ($12.5 billion). It is a fraction of the bailouts given to other EU countries, with the latest sufferer Spain asking for as much as €100 billion ($125 billion) for its banks.

Earlier, US ratings agency Fitch downgraded Cyprus to "junk" status. The move was prompted by the amount of rescue money that would be needed to bail out its Greece-exposed banks. The ratings agency estimated that the country will need another €4 billion to recapitalize its banking sector.

 

(emphasis added)

What would bondholders ever do without Fitch?

 

Credit Market Charts Update –  Is Slovenia the Next Bailout Candidate?

Below is our customary update of credit market charts, including the usual suspects: CDS on various sovereign debtors and banks, bond yields, euro basis swaps and a few other charts. Charts and price scales are color coded (readers should keep the different price scales in mind when assessing 4-in-1 charts). Where necessary we have provided a legend for the color coding below the charts. Prices are as of Monday's close.

Not surprisingly, CDS spreads and bond yields in the euro area and neighboring countries edged higher again on Monday. CDS on Greece reached a new post-PSI high of 12,145 basis points. The next default and/or bailout seems all but certain. Slovenia is meanwhile already waiting in the wings as the euro area's likely bailout candidate number six.


„Slovenia is seeking private investors to boost capital at its banks, including Nova Ljubljanska Banka d.d., and hopes to avoid turning to international lenders for a “last resort” bailout, Finance Minister Janez Sustersic said.

“We are working to avoid a bailout for Slovenian banks as this would be a bad signal at the moment — it’s a solution of last resort,” Sustersic told reporters in Luxembourg today on the side lines of the meeting of euro region finance ministers. “If possible — and I think it is possible — we would get private investors for that, partially now and the rest by the end of the year so that such aid won’t be necessary.”

Nova Ljubljanska Banka d.d., Slovenia’s biggest financial services company, needs 500 million euros ($627 million) to improve its capital ratio by the end of the month and would need “much more” cash to start lending to companies and support economic growth, Sustersic said earlier this month.“


At least that sounds comparatively cheap.

 


 

5 year CDS on Portugal, Italy, Greece and Spain – click chart for better resolution.

 


 

5 year CDS on France, Belgium, Ireland and Japan – click chart for better resolution.

 


 

5 year CDS on Bulgaria, Croatia, Hungary and Austria -Croatia, a casus corbis– click chart for better resolution.

 


 

5 year CDS on Latvia, Lithuania, Slovenia and Slovakia; Slovenia is also battling with a less than solid banking system. Luckily the bailout application is regarded as a 'last resort' – click chart for better resolution.

 


 

5 year CDS on Romania, Poland, the Ukraine and Estonia – note that Estonia enjoys the second lowest sovereign CDS spread of the entire euro area right after Germany – click chart for better resolution.

 


 

5 year CDS on Germany (white) , the US (orange) and the Markit SovX index of CDS on 19 Western European sovereigns (yellow) – click chart for better resolution.

 


 

5 year CDS on Bahrain, Saudi Arabia, Morocco and Turkey – click chart for better resolution.

 


 

Three month, one year, three year and five year euro basis swaps – heading in the wrong direction again – click chart for better resolution.

 


 

Our proprietary unweighted index of 5 year CDS on the senior debt of eight major European banks (BBVA, Banca Monte dei Paschi di Siena, Societe Generale, BNP Paribas, Deutsche Bank, UBS, Intesa Sanpaolo and Unicredito) –  white line,  compared to 5 year CDS on major US banks (Morgan Stanley – red line, Goldman Sachs – orange line, Citigroup – green line) as well as Credit Suisse – yellow line – click chart for better resolution.

 


 

10 year government bond yields of Italy, Greece, Portugal and Spain – the yields of the usual suspects are heading higher again – click chart for better resolution.

 


 

Austria's 10 year note yield (green), UK gilts yield (yellow), Ireland's 9 year note yield (white) and the price of the Greek 2 year note (orange line – prior to the PSI deal break this showed the yield) – click chart for better resolution.

 


 

5 year CDS on Australia's 'Big Four' banks, long term. This looks suspiciously like a continuation formation – click chart for better resolution.

 


 

Lastly, a chart we pinched from the Short Side of Long, that compares the Philly Fed index to the US stock market. As can be seen, negative divergences between the two tend to bode ill for stocks – click chart for better resolution.

 


 

Addendum: Finally, Some Good News from South America

After nationalizations in Argentina, the imposition of unreasonable mining taxes in Ecuador and growing resource nationalism in Bolivia and strikes in Chile,  there is finally a piece of good news emanating from South America: Bolivia legalizes the growing of  pot, and thereby pushes a knife deep into the senseless and brutal drug war's black heart.  (link:  http://www.reuters.com/article/2012/06/24/us-uruguay-marijuana-idUSBRE85N0HN20120624  )


"The leftist government announced plans last week to legalize the marijuana market as part of a drive to stop rising crime, arguing that the drug is less harmful than the black market where it currently trades.

The use of cannabis and other drugs is already legal in Uruguay, one of Latin America's safest countries and a trailblazer on liberal lawmaking. The reform being sent to Congress would legalize and regulate its sale and production.

Meeting the smoking needs of the nation of 3.3 million people will require annual production of about 29.8 tons, the government estimates, and the drug will be cultivated in a plantation of roughly 100 hectares (247 acres).

It is not yet clear whether the drug would be grown by the state or by private contractors under license.

Planting should begin in September if the law passes Congress swiftly as expected – despite some opposition from rightist lawmakers, a government source said. Harvesting would start six months later, said Julio Calzada, secretary general of the National Drugs Board.

"By regulating the marijuana market in the way we're proposing, we're going to undermine the development of trafficking of other drugs," Calzada told Reuters on Saturday.

[…]

Calzada said cannabis would carry a sales tax, the proceeds of which would fund rehabilitation programs for addicts. State-grown marijuana could also be used for medical purposes.

Pro-legalization groups welcomed the proposal by the government of President Jose Mujica, a former guerrilla fighter, but they are calling for it to allow personal cultivation too.

"As far as we're concerned, legalizing marijuana is an attack on the drugs trade, which is sustained by the policy of prohibition," said Martin Collazo from the Prolegal group.


(emphasis added)

And it's actually a leftist government doing that! Wonders will never cease. Of course the Great Commissar up North was none too pleased: 


"U.S. President Barack Obama made clear to Latin American leaders at the Summit of the Americas in Cartagena in April that he opposes the legalization of drugs."


Tough titties, as they say. Some of them evidently weren't listening. 


Addendum: Hinde Capital's 'Eyes Wide Shut', Part Two

Here is Hinde Capital's 'Eyes Wide Shut' report on the UK economy, part 2 for download (pdf)

Part One can be downloaded here.




Charts by: Bloomberg, The Short Side of Long

 


 
 

Emigrate While You Can... Learn More

 
 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

One Response to “Cyprus Officially Keels Over, Plus Credit Market Charts”

  • jimmyjames:

    The BoE may circumvent this equilibrium but this
    entails additional costs in the form of high inflation
    and merely kicks the proverbial can down the road.
    The UK economy has too much debt and not sufficient
    current and future income to service it. The
    central bank may alleviate this issue by generating
    excess reserves in the banking system (quantitative
    and qualitative easing), but this may ultimately
    lead to a loss in confidence for the currency

    ************

    Following the same old historical recipe that always leads to collapse-

    First they inflate the money supply-then they loot the treasury-then they loot the citizens-then the currency collapses-then the government falls-then a man riding a white horse appears-

    Maybe the UK should have joined the Euro-they would have Germany for at least a symbolic backup and an escape route-

    http://grooveshark.com/s/Why+Aye+Man/3XnRtL?src=5

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Gold Sector Update – What Stance is Appropriate?
      The Technical Picture - a Comparison of Antecedents We wanted to post an update to our late December post on the gold sector for some time now (see “Gold – Ready to Spring Another Surprise?” for the details). Perhaps it was a good thing that some time has passed, as the current juncture seems particularly interesting. We received quite a few mails from friends and readers recently, expressing concern about the inability of gold stocks to lead, or even confirm strength in gold of...
  • Don’t Blame Trump When the World Ends
    Alien Economics There was, indeed, a time when clear thinking and lucid communication via the written word were held in high regard. As far as we can tell, this wonderful epoch concluded in 1936. Everything since has been tortured with varying degrees of gobbledygook.   One should probably not be overly surprised that the abominable statist rag Time Magazine is fulsomely praising Keynes' nigh unreadable tome. We too suspect that this book has actually lowered the planet-wide IQ –...
  • Incrementum Advisory Board Meeting, Q1 2017 and Some Additional Reflections
      Looming Currency and Liquidity Problems The quarterly meeting of the Incrementum Advisory Board was held on January 11, approximately one month ago. A download link to a PDF document containing the full transcript including charts an be found at the end of this post. As always, a broad range of topics was discussed; although some time has passed since the meeting, all these issues remain relevant. Our comments below are taking developments that have taken place since then into...
  • What is the Best Time to Buy Stocks?
      Chasing Entry Points Something similar to the following has probably happened to you at some point: you want to buy a stock on a certain day and in order to time your entry, you start watching how it trades. Alas, the price rises and rises, and your patience begins to wear thin. Shouldn't a correction set in soon and provide you with a more favorable buying opportunity?   Apple-Spotting – a five minute intraday chart showing the action in AAPL on February 1, 2017 - an...
  • Trump and the Draining of the Swamp
      Swamp Critters BALTIMORE – The Dow is back above the 20,000-point mark. Federal debt, as officially tallied, is up to nearly $20 trillion. The two go together, egging each other on. The Dow is up 20 times since 1980. So is the U.S. national debt. Debt feeds the stock market and the swamp. What’s not up so much is real output, as measured by GDP. It’s up only 6.4 times over the same period. Debt and asset prices have been rising three times as fast as GDP for 36 years! Best...
  • Gold and Silver Divergence – Precious Metals Supply and Demand
      Gold and Silver Divergence – Precious Metals Supply and Demand Last week, the prices of the metals went up, with the gold price rising every day and the silver price stalling out after rising 42 cents on Tuesday. The gold-silver ratio went up a bit this week, an unusual occurrence when prices are rising. Everyone knows that the price of silver is supposed to outperform — the way Pavlov’s Dogs know that food comes after the bell. Speculators usually make it...
  • When Trumponomics Meets Abenomics
      Thirty Year Retread What will President Trump and Japanese Prime Minister Shinzo Abe talk about when they meet later today? Will they gab about what fishing holes the big belly bass are biting at? Will they share insider secrets on what watering holes are serving up the stiffest drinks? [ed. note: when we edited this article for Acting Man, the meeting was already underway]   Japan's prime minister Shinzo Abe, a dyed-in-the-wool Keynesian and militarist, meets America's...
  • The Great Wailing
      Regret and Suffering BALTIMORE – Victoribus spolia... So far, the most satisfying thing about the Trump win has been the howls and whines coming from the establishment. Each appointment – some good, some bad from our perspective – has brought forth such heavy lamentations.   Oh no! Alaric the Visigoth is here! Hide the women and children! And don't forget the vestal virgins, if you can find any...   You’d think Washington had been invaded by Goths, now...
  • Receive a One Percent Gift When Buying or Selling a Home
      How to Save Money When Buying or Make More When Selling a Home In your professional capacity and perhaps also in your private life, you may be closely involved with financial and commodity markets. Trading in stocks, bonds or futures is part of your daily routine.  Occasionally you probably have to deal with real estate as well though – if you e.g. want to purchase an apartment or a house, or if own a home you wish to sell.   The people who took this photograph probably want to...
  • Silver Futures Market Assistance – Precious Metals Supply and Demand
      Silver Is Pushed Up Again This week, the prices of the metals moved up on Monday. Then the gold price went sideways for the rest of the week, but the silver price jumped on Friday.   Taking off for real or not? Photo credit: NASA   Is this the rocket ship to $50? Will Trump’s stimulus plan push up the price of silver? Or just push silver speculators to push up the price, at their own expense, again? This will again be a brief Report this week, as we are busy...
  • Unleashing Wall Street
      To Unleash or Not to Unleash, That is the Question... LOVINGSTON, VIRGINIA –  Corporate earnings have been going down for nearly three years. They are now about 10% below the level set in the late summer of 2014. Why should stocks be so expensive?   Example of something that one should better not unleash. The probability that a win-lose proposition will develop upon meeting it seems high. It wins, because it gets to eat... Image credit: Urs Hagen   Oh,...
  • Boondoggles for the Swamp Critters
      Monster or Mozart? BALTIMORE – Investors seem to be holding their breath, like a man hiding a cigarette from his wife. It’s just a feeling, and it’s not the first time we’ve had it... but it feels as though it wouldn’t take much to send them all running.   Actually, they're not going anywhere yet... but there is a lot of overconfidence by those who were very worried when prices were a lot better - click to enlarge.   Meanwhile... we’re coming to a deep...

Austrian Theory and Investment

Support Acting Man

Own physical gold and silver outside a bank

Archive

j9TJzzN

350x200

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com