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:

  • Modi’s Great Leap Forward
      India’s Currency Ban – Part VIII India’s Prime Minister, Narendra Modi, announced on 8th November 2016 that Rs 500 (~$7.50) and Rs 1,000 (~$15) banknotes would no longer be legal tender. Linked are Part-I, Part-II, Part-III, Part-IV, Part-V, Part-VI and Part-VII, which provide updates on the demonetization saga and how Modi is acting as a catalyst to hasten the rapid degradation of India and what remains of its institutions.   India’s Pride and Joy   Indians are...
  • Global Recession and Other Visions for 2017
      Conjuring Up Visions Today’s a day for considering new hopes, new dreams, and new hallucinations.  The New Year is here, after all.  Now is the time to turn over a new leaf and start afresh. Naturally, 2017 will be the year you get exactly what’s coming to you. Both good and bad.  But what else will happen?   Image of a recently discarded vision... Image by Michael Del Mundo   Here we begin by closing our eyes and slowing our breath.  We let our mind...
  • US Financial Markets – Alarm Bells are Ringing
      A Shift in Expectations When discussing the outlook for so-called “risk assets”, i.e., mainly stocks and corporate bonds (particularly low-grade bonds) and their counterparts on the “safe haven” end of the spectrum (such as gold and government bonds with strong ratings), one has to consider different time frames and the indicators applicable to these time frames. Since Donald Trump's election victory, there have been sizable moves in stocks, gold and treasury bonds, as the election...
  • The Great El Monte Public Pension Swindle
      Nowhere City California There are places in Southern California where, although the sun always shines, they haven’t seen a ray of light for over 50-years.  There’s a no man’s land of urban blight along Interstate 10, from East Los Angeles through the San Gabriel Valley, where cities you’ve never heard of and would never go to, are jumbled together like shipping containers on Terminal Island.  El Monte, California, is one of those places.   Advice dispensed on Interstate...
  • A Trade Deal Trump Cannot Improve
      Worst in Class BALTIMORE – People can believe whatever they want. But sooner or later, real life intervenes. We just like to see the looks on their faces when it does. By that measure, 2017 may be our best year ever. Rarely have so many people believed so many impossible things.   Alice laughed. "There's no use trying," she said: "one can't believe impossible things." "I daresay you haven't had much practice," said the Queen. "When I was your age, I always did it for...
  • Pope Francis Now International Monetary Guru
      Neo-Marxist Pope Francis Argues for Global Central Bank As the new year dawns, it seems the current occupant of St. Peter’s Chair will take on a new function which is outside the purview of the office that the Divine Founder of his institution had clearly mandated.   Neo-Papist transmogrification. We highly recommend the economic thought of one of Francis' storied predecessors, John Paul II, which we have written about on previous occasions. In “A Tale of Two Popes” and...
  • Where’s the Outrage?
      Blind to Crony Socialism Whenever a failed CEO is fired with a cushy payoff, the outrage is swift and voluminous.  The liberal press usually misrepresents this as a hypocritical “jobs for the boys” program within the capitalist class.  In reality, the payoffs are almost always contractual obligations, often for deferred compensation, that the companies vigorously try to avoid.  Believe me.  I’ve been on both sides of this kind of dispute (except, of course, for the “failed”...
  • Trump’s Trade Catastrophe?
      “Trade Cheaters” It is worse than “voodoo economics,” says former Treasury Secretary Larry Summers. It is the “economic equivalent of creationism.” Wait a minute -  Larry Summers is wrong about almost everything. Could he be right about this?   Larry Summers, the man who is usually wrong about almost everything. As we have always argued, the economy is much safer when he sleeps, so his tendency to fall asleep on all sorts of occasions should definitely be welcomed....
  • Money Creation and the Boom-Bust Cycle
      A Difference of Opinions In his various writings, Murray Rothbard argued that in a free market economy that operates on a gold standard, the creation of credit that is not fully backed up by gold (fractional-reserve banking) sets in motion the menace of the boom-bust cycle. In his The Case for 100 Percent Gold Dollar Rothbard wrote:   I therefore advocate as the soundest monetary system and the only one fully compatible with the free market and with the absence of force or fraud...
  • Trump’s Plan to Close the Trade Deficit with China
      Rags to Riches Jack Ma is an amiable fellow.  Back in 1994, while visiting the United States he decided to give that newfangled internet thing a whirl.  At a moment of peak inspiration, he executed his first search engine request by typing in the word beer.   Jack Ma, founder and CEO of Alibaba, China's largest e-commerce firm. Once he was a school teacher, but it turned out that he had enormous entrepreneurial talent and that the world of wheelers, dealers, movers and...
  • Side Notes, January 14 - Red Flags Over Goldman Sachs
      Red Flags Over Goldman Sachs Just to prove that I am an even-handed insulter, here is a rant about my former employer, Goldman Sachs. The scandal at 1MDB, the Malaysian sovereign wealth fund from which it appears that billions were stolen by politicians all the way up to the Prime Minister, continues to unfold.   The main players in the 1MDB scandal. Irony alert: apparently money siphoned off from 1MDB was used to inter alia finance Martin Scorcese's movie “The Wolf of...
  • Silver’s Got Fundamentals - Precious Metals Supply-Demand Report
      Supply-Demand Fundamentals Improve Noticeably Last week was another short week, due to the New Year holiday. We look forward to getting back to our regularly scheduled market action.   Photo via thedailycoin.org   The prices of both metals moved up again this week. Something very noticeable is occurring in the supply and demand fundamentals. We will give an update on that, but first, here’s the graph of the metals’ prices.   Prices of gold and silver...

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