Posts Tagged ‘BBVA’
The EU Summit Agrees on the Well-Intentioned, but Ultimately Meaningless and Unenforceable 'Fiscal Compact'
The Czechs and Brits seem to be the only ones who can clearly see where the HMS EU Titanic is now heading. Or let us rather put it this way: they are perhaps not the only ones who can see where it is heading (toward the proverbial iceberg), but they have turned out to be the only ones who – for now anyway – refuse to take part in this perilous journey.
We are slightly surprised that not more of the former Eastern European command economies have jumped ship. After all, the path the EU is now on – toward increased centralization and rule by faceless bureaucrats with little democratic accountability – is fatally reminiscent of the organization they once were involuntary members of, the COMECON of yore (Совет экономической взаимопомощи, pronounced: 'soviet ekonomicheskoy vsaymopomoshchi' – the 'Council for Mutual Economic Assistance').
Fitch Strikes Again
Following on the heels of the recent euro area downgrades by S&P, Fitch has now also issued several new downgrades. While this has not been unexpected, it further complicates the efforts to bring the crisis under control. Of course one must always keep in mind that these downgrades are only belated confirmations of what the markets have long ago recognized and priced in already. The only new problems raised by such downgrades come from indexation and the rules governing the fiduciary responsibilities of certain institutional investors. Investors who allocate their bond investments by the weightings that such bonds have in bond indexes are forced to sell bonds that are removed from indexes due to rating changes – this is one of the effects currently plaguing Portugal's bond market.
This in turn then forces clearing firms such as LCH Clearnet to alter the margin respectively haircut requirements of the bonds concerned in repo transactions, if their spread over the benchmark (a mixture of several AAA rated euro area government bonds) increases beyond a certain minimum threshold.
Credit Market Watch, January 26
Below is our customary collection of charts updating the usual suspects: CDS spreads, bond yields, euro basis swaps and a few other charts. Charts and price scales are color coded (readers should keep the different scales in mind when assessing 4-in-1 charts). Prices are as of Wednesday's close.
While most moves in these markets have been rather unremarkable lately, one must keep a close eye on what is happening in view of the chock-full 'event calendar' in the euro area over coming weeks.
Most euro area sovereign CDS and bond yields have seen a little bounce yesterday, but the most notable moves are still occurring in CDS and yields on Portuguese government debt. As mentioned yesterday, Portugal is now clearly in the market's crosshairs. This is partly a result of the Greek debt fiasco, but mostly it is due to the somewhat belated realization that even in the wake of recent economic reforms, Portugal will simply not be able to cope with its debt as envisaged in the original bailout package.
Portugal's prime minister has pleaded for more time: if only the markets would give him time, or the EU somehow arranged to give him enough time, all would be well. Alas, time is in short supply these days. The markets no longer believe it will make a difference. In fact, the belief is probably that over time, things are bound to still get worse, given the recent economic downturn.
As laudable as for instance Portugal's recent labor market reforms are, they have been put in place a year or two too late.
Credit Markets Chart Update, January 25
Below is our customary collection of charts updating the usual suspects: CDS spreads, bond yields, euro basis swaps and several other charts. Charts and price scales are color coded (readers should keep the different scales in mind when assessing 4-in-1 charts). CDS prices are as of Tuesday's close, except yields and basis swaps which are as of today.
Credit conditions in euro-land continue to ease across the board, with the notable exception of Portugal.
Also, one of the Middle Eastern CDS spreads that have broken out recently continues to march higher, namely CDS on Bahrain. Bahrain is under Sunni rule, but has a Shi'ite majority population. This could create complications in the context with the recent confrontation between the West and Iran.
Goodbye, Upbeat Tone?
After the S&P downgrade of nine euro area sovereigns late last week and the fact that Greece's debt negotiations have stalled, Reuters reports today on the sudden absence the more optimistic tone that followed recent successful debt auctions and falling yields for Italy and Spain.
Armageddon Averted? Not So Fast.
Mario Draghi was eager yesterday to point out that the measures taken by the ECB have 'avoided an imminent credit crunch' in the euro area and pointed to the decline in various government bond yields as a measure of success.
Italy sold € 12 billion of bills yesterday, at the upper end of the target range and at a far better yield than on occasion of the last sale, seemingly underscoring Draghi's assertions.
Euro Area Credit Market Charts
Below is our customary collection updates of the usual suspects: CDS spreads, bond yields, euro basis swaps and several other charts. Both charts and price scales are color coded (readers should keep the different scales in mind when assessing 4-in-1 charts). CDS prices are as of Friday's close, bond yields and basis swaps are as of today's close (Bloomberg updates of CDS are always a bit late).
Hungary Back At the Bailout Trough As Investors Go On Strike
Today Hungary's government came under renewed pressure, as yields on Hungary's government debt keep soaring and a treasury bill auction failed.
The government sold 35 billion forint ($140 million) of one-year bills, 10 billion forint less than targeted, data from the Debt Management Agency, known as AKK, on Bloomberg show. The average yield rose to 9.96 percent, the highest since April 2009, from 7.91 percent at the last sale of the same-maturity debt on Dec. 22.
The cost of insuring Hungary’s debt through credit-default swaps reached an all-time high and the forint touched a record low versus the euro after aid negotiations stalled because of new laws that threaten to undermine the independence of the central bank. Hungary needs a deal as soon as possible and is ready to discuss the conditions, Tamas Fellegi, the minister assigned to lead the talks, told reporters today.
“Fellegi’s comments are aimed at providing reassurance, but I think the market will adopt a seeing-is-believing approach,” Timothy Ash, a London-based economist at Royal Bank of Scotland Group Plc, said in an e-mailed comment. “Market trust in this administration is now at rock bottom levels.”
Euro Area Credit Market Charts Update and A Mixed Bag of News From Euroland
Below is our customary collection updates of the usual suspects: CDS spreads, bond yields, euro basis swaps and several other charts. Both charts and price scales are color coded (readers should keep the different scales in mind when assessing 4-in-1 charts). Prices are as of Tuesday's close. Among the big movers in CDS spreads we have of course Hungary, which has become a new focus of market worries. Otherwise no large moves have occurred (Spain is an exception to that as well, see below), but euro basis swaps have recovered smartly now that end of year related liquidity pressures have eased.
Euro Area Credit Market Charts – Update
Below is our customary collection of CDS prices, bond yields, euro basis swaps and several other charts. Both charts and price scales are color coded (readers should keep the different scales in mind when assessing 4-in-1 charts). Prices are as of Tuesday's close, except for bond yields which reflect today's close in Europe. Spain's and Italy's yields have come down a tad today.
Moody's Gets Sentimental Over Austria
The normally hard-hitting credit rating agency Moody's, widely despised and feared among governments in the euro area, just reaffirmed the 'AAA' rating of the 'island of the blessed' as it is ironically known among its inhabitants, the picturesque Socialist Republic of Austria. Moody's has it right insofar as it can of course never be said that there is a crisis in Austria as long as the supply of 'Mozartkugeln' remains secure.
Euro Area Credit Market Charts – An Update
Below is our customary collection of CDS prices, bond yields, euro basis swaps and several other charts. Both charts and price scales are color coded (readers should keep the different scales in mind when assessing 4-in-1 charts). Prices are as of Wednesday's close.
We have only sporadically updated these charts in recent days as not much is happening into year end, although there have been some gyrations in euro basis swaps as the scramble for dollars continues.
As a result of speculation that the ECB's latest measures will create a pause in the crisis and may lead to some sovereign bond buying by banks, most of the major sovereign CDS spreads continue to come in a little bit. Alas, bond yields have seen a bounce in recent days on profit taking, especially Spain's.
Note also that CDS on France and Belgium remain quite elevated and CDS on Japan have suddenly begun to rise (Japan is always a potential 'gray swan').
Most read in the last 20 days:
- Fresh Mainstream Nonsense on Gold Demand
They Will Never Get It... We and many others have made a valiant effort over the years to explain what actually moves the gold market (as examples see e.g. our article “Misconceptions About Gold”, or Robert Blumen's excellent essay “Misunderstanding Gold Demand”). Sometimes it is a bit frustrating when we realize it has probably all been for naught. Gold wants to know what it has done now... Photo credit: Ajay Verma / Reuters This was brought home to...
- Switzerland About to Vote on “Free Lunch” for Everyone
Will the Swiss Guarantee CHF 75,000 for Every Family? In early June the Swiss will be called upon to make a historic decision. Switzerland is the first country worldwide to put the idea of an Unconditional Basic Income to a vote and the outcome of this referendum will set a strong precedent and establish a landmark in the evolution of this debate. The Swiss Basic Income Initiative in a demonstration in front of parliament. As we have previously reported (see “Swiss...
- Drowning the Fir
Presidential Duties Our editor recently stumbled upon an image in one of the more obscure corners of the intertubes which we felt we had to share with our readers. It provides us with a nice metaphor for the meaningfulness of government activity. First, here is a look at the picture – just quietly contemplate it for while and let it work its magic on you: Yes, these two gentlemen are actually watering a tree in the middle of a downpour... Photo via...
- Gold – The Commitments of Traders
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- Heretical Thoughts and Doing the Unthinkable
Heresy! NORMANDY, France – The Dow rose 222 points on Tuesday – or just over 1%. But we agree with hedge-fund manager Stanley Druckenmiller: This is not a good time to be a U.S. stock market bull. Legendary former hedge fund manager Stanley Druckenmiller at the Ira Sohn conference – not an optimist at present, to put it mildly. Photo credit: David A. Grogan / CNBC Speaking at an investment conference in New York last week, George Soros’ former partner...
- Staying Home on Election Day
Pretenses and Conceits The markets are eerily quiet… like an angry man with something on his mind and a shotgun in his hand. We will leave them to brood… and return to the spectacle of the U.S. presidential primaries. On display are all the pretenses, conceits, and absurdities of modern government. And now, the race narrows to the two most widely distrusted and loathed candidates. US election circus: Deep State Rep vs. Rage Channeller The first, a loose...
- How the Deep State’s Cronies Steal From You
Expanding in Ireland DUNMORE EAST, Ireland – We came down the coast from Dublin to check on our new office building. For this visit, we wanted to stay somewhere different than we normally do. So we chose a small hotel on the coast, called the Strand Inn. Irish landscape with alien landing pads. Even the guys from Rigel II have heard about Ireland's corporate tax rate. Photo credit: Tourism Ireland It is an excellent place for seafood and soda bread on a...
- The Japanese Popsicle Affair
Policy-Induced Contrition in Japan As we keep saying, there really is no point in trying to make people richer by making them poorer – which is what Shinzo Abe and Haruhiko Kuroda have been trying to do for the past several years. Not surprisingly, they have so to speak only succeeded in achieving the second part of the equation: they have certainly managed to impoverish their fellow Japanese citizens. Shinzo Abe and Haruhiko Kuroda, professional yen assassins Photo credit:...
- How Elon Musk Helps Fools to Part Ways with Their Money
Tesla Goes Fishing Tesla Motors is up to something remarkable. But what it is, exactly, is unclear. According to the Tesla Motors website, the company’s mission is: to accelerate the world’s transition to sustainable transport. Tesla Model 3: the company’s first “mass market” entry so to speak, which is supposed to help the world to reach the nirvana of “sustainable” transport. On the side, it is helping a number of Wall Street firms to increase their...
- Kuroda-San in the Mouth of Madness
Deluded Central Planners Zerohedge recently reported on an interview given by Lithuanian ECB council member Vitas Vasiliauskas, which demonstrates how utterly deluded the central planners in the so-called “capitalist” economies of the West have become. His statements are nothing short of bizarre (“we are magic guys!”) – although he is of course correct when he states that a central bank can never “run out of ammunition”. BoJ governor Haruhiko Kuroda Photo credit:...
- Revolution at the Ranch
Alarming News BALTIMORE, Maryland – An alarming email came on Tuesday from our ranch in Argentina: “Bad things going on… We thought we had the originarios problem settled. Not at all. They just invaded the ranch.” Originarios on the march... Photo credit: cta.org.ar To bring new readers fully into the picture, Northwest Argentina, where we have our ranch, has a revolution going on. Some of the indigenous people – that is, people with Native...
- The Long-Buried Secret of Napoleon Bonaparte
Family Secrets DUBLIN – The smart money is getting out while the gettin’ is still good. That’s the message we get from reading the recent headlines. Here’s the Financial Times: Redemptions from stock funds have hit nearly $90 billion this year as portfolio managers and hedge funds struggle to navigate a market that no longer seems driven by radical central bank policy. S&P 500 Index: causing navigational problems - click to...