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: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

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:

  • How to Buy Low When Everyone Else is Buying High
      When to Sell? The common thread running through the collective minds of present U.S. stock market investors goes something like this: A great crash is coming.  But first there will be an epic run-up climaxing with a massive parabolic blow off top.  Hence, to capitalize on the final blow off, investors must let their stock market holdings ride until the precise moment the market peaks – and not a moment more.  That’s when investors should sell their stocks and go to...
  • What Kind of Stock Market Purge Is This?
      Actions and Reactions Down markets, like up markets, are both dazzling and delightful. The shock and awe of near back-to-back 1,000 point Dow Jones Industrial Average (DJIA) free-falls is indeed spectacular. There are many reasons to revel in it.  Today we shall share a few. To begin, losing money in a multi-day stock market dump is no fun at all.  We'd rather get our teeth drilled by a dentist.  Still, a rapid selloff has many positive qualities.   Memorable moments from...
  • Monetary Metals Brief 2018
      Short and Long Term Forecasts Predicting the likely path of the prices of the metals in the near term is easy. Just look at the fundamentals. We have invested many man-years in developing the theory, model, and software to calculate it. Every week we publish charts and our calculated fundamental prices.   A selection of 1 and ½ ounce gold bars – definitely more fondle-friendly than bitcoin, but a bit more cumbersome to send around. [PT]   However, predicting the...
  • US Stocks - Minor Dip With Potential, Much Consternation
      It's Just a Flesh Wound – But a Sad Day for Vol Sellers On January 31 we wrote about the unprecedented levels - for a stock market index that is - the weekly and monthly RSI of the DJIA had reached (see: “Too Much Bubble Love, Likely to Bring Regret” for the astonishing details – provided you still have some capacity for stock market-related astonishment). We will take the opportunity to toot our horn by reminding readers that we highlighted VIX calls of all things as a worthwhile...
  • Why I Own Gold and Gold Mining Companies – An Interview With Jayant Bandari
      Opportunities in the Junior Mining Sector Maurice Jackson of Proven and Probable has recently interviewed Jayant Bandari, the publisher of Capitalism and Morality and a frequent contributor to this site. The topics discussed include currencies, bitcoin, gold and above all junior gold stocks (i.e., small producers and explorers). Jayant shares some of his best ideas in the segment, including arbitrage opportunities currently offered by pending takeovers – which is an area that generally...
  • When Budget Deficits Will Really Go Vertical
      Mnuchin Gets It United States Secretary of Treasury Steven Mnuchin has a sweet gig.  He writes rubber checks to pay the nation’s bills.  Yet, somehow, the rubber checks don’t bounce.  Instead, like magic, they clear. How this all works, considering the nation’s technically insolvent, we don’t quite understand.  But Mnuchin gets it.  He knows exactly how full faith and credit works – and he knows plenty more.   Master of the Mint and economy wizard Steven Mnuchin and...
  • “Strong Dollar”, “Weak Dollar” - What About a Gold-Backed Dollar?
      Contradictory Palaver The recent hullabaloo among President Trump’s top monetary officials about the Administration’s “dollar policy” is just the start of what will likely be the first of many contradictory pronouncements and reversals which will take place in the coming months and years as the world’s reserve currency continues to be compromised.  So far, the Greenback has had its worst start since 1987, the year of a major stock market reset.   A modern-day...
  • Seasonality of Individual Stocks – an Update
      Well Known Seasonal Trends Readers are very likely aware of the “Halloween effect” or the Santa Claus rally. The former term refers to the fact that stocks on average tend to perform significantly worse in the summer months than in the winter months, the latter term describes the typically very strong advance in stocks just before the turn of the year. Both phenomena apply to the broad stock market, this is to say, to benchmark indexes such as the S&P 500 or the...
  • The Future of Copper – Incrementum Advisory Board Meeting Q1 2018
      Copper vs. Oil The Q1 2018 meeting of the Incrementum Fund's Advisory Board took place on January 24, about one week before the recent market turmoil began. In a way it is funny that this group of contrarians who are well known for their skeptical stance on the risk asset bubble, didn't really discuss the stock market much on this occasion. Of course there was little to add to what was already talked about extensively at previous meetings. Moreover, the main focus was on the topic...
  • US Equities – Retracement Levels and Market Psychology
      Fibonacci Retracements   Following the recent market swoon, we were interested to see how far the rebound would go. Fibonacci retracement levels are a tried and true technical tool for estimating likely targets – and they can actually provide information beyond that as well. Here is the S&P 500 Index with the most important Fibonacci retracement levels of the recent decline shown:   So far, the SPX has made it back to the 61.8% retracement level intraday, and has weakened...

Support Acting Man

Item Guides

Top10BestPro
j9TJzzN

Austrian Theory and Investment

Archive

350x200

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

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]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com