Contagion Shakes The Euro Core As 10 Year German Bund Auction A "Complete And Utter Disaster"
Earlier today Germany tried to sell €6 billion of 10 Year bunds. It "sold" €3.644 at a 1.98% yield. Which meant the German debt agency had to retain, i.e., not sell, the 39% balance, or €2.356 billion. Said otherwise the offering was a complete disaster and as Reuters points out, one of Germany's worst bond sales since the launch of the euro,
and that much higher Bund yields are coming very soon to a
neighborhood near you. The sale "prompted concerns the debt crisis was
even beginning to threaten Berlin on Wednesday, with the Bundesbank
forced to buy large amounts of the bonds to ensure the auction did not
fail. The low yields offered on the 10-year paper deterred investors
from the auction, especially because of growing concerns over the cost
to Germany of the escalating crisis." So what was otherwise formerly
sacrosanct has just become reviled: welcome to fiat's greatest hits.
The resulting 10 Year yield chart should surprise nobody. As for next
steps: first the UK, then Japan, and finally the US...
The
overnight news of worries over Dexia's bailout deal and the weak
Chinese PMI print did nothing to help the generally poor sentiment as
the US closed on the stress test news. Equity and Treasury Futures (as
cash was closed in Tokyo) were in risk off mode but stabilized with ES
around 1170 (-1% from US close). With Europe opening and TSYs trading
once again, CONTEXT shows that the sell-off is broad based and supports equity weakness for now. European sovereigns are opening generally higher in yield and spread across the board with Ireland the stand-out currently.
France and Belgium are also weak performers (Dexia?) followed by Italy
and Spain. European credit has gapped down on the open with senior and sub financials worst performers
(+7bps and +14bps respectively) followed by XOver and Main (+11bps and
+3.5bps) - in line with US underperformance for now. Bloomberg's BE500
equity index just opened gap down around 1% but is outperforming
credit for now as EURUSD touches 1.3440 again.
Earlier today Germany tried to sell €6 billion of 10 Year bunds. It "sold" €3.644 at a 1.98% yield. Which meant the German debt agency had to retain, i.e., not sell, the 39% balance, or €2.356 billion. Said otherwise the offering was a complete disaster and as Reuters points out, one of Germany's worst bond sales since the launch of the euro,
and that much higher Bund yields are coming very soon to a
neighborhood near you. The sale "prompted concerns the debt crisis was
even beginning to threaten Berlin on Wednesday, with the Bundesbank
forced to buy large amounts of the bonds to ensure the auction did not
fail. The low yields offered on the 10-year paper deterred investors
from the auction, especially because of growing concerns over the cost
to Germany of the escalating crisis." So what was otherwise formerly
sacrosanct has just become reviled: welcome to fiat's greatest hits.
The resulting 10 Year yield chart should surprise nobody. As for next
steps: first the UK, then Japan, and finally the US...Fitch Pours A-98 Gasoline On The European Fire, Threatens AAA Rating Of Parent France
It just goes from bad to surreal in Europe where the latest moment of pure Greek "gods kill titans" tragicomedy, comes from French rating agency Fitch threatening to cut... France? Excerpts via Bloomberg:- FITCH: FRANCE CAN'T ABSORB MORE SHOCKS WITHOUT UNDERMINING AAA
- FITCH: FRENCH AAA WOULD BE AT RISK IF CRISIS INTENSIFIES
- FITCH: ADDED MEASURES LIKELY NEEDED FOR FRANCE '13 DEFICIT GOAL
- FITCH PROJECTS FRANCE DEFICIT IN '13 ABOUT 4% OF GDP
From Bad To Worse As Europe Opens
The
overnight news of worries over Dexia's bailout deal and the weak
Chinese PMI print did nothing to help the generally poor sentiment as
the US closed on the stress test news. Equity and Treasury Futures (as
cash was closed in Tokyo) were in risk off mode but stabilized with ES
around 1170 (-1% from US close). With Europe opening and TSYs trading
once again, CONTEXT shows that the sell-off is broad based and supports equity weakness for now. European sovereigns are opening generally higher in yield and spread across the board with Ireland the stand-out currently.
France and Belgium are also weak performers (Dexia?) followed by Italy
and Spain. European credit has gapped down on the open with senior and sub financials worst performers
(+7bps and +14bps respectively) followed by XOver and Main (+11bps and
+3.5bps) - in line with US underperformance for now. Bloomberg's BE500
equity index just opened gap down around 1% but is outperforming
credit for now as EURUSD touches 1.3440 again.There Has Been Some Forced Selling In The Commodities Complex
With MF Global going bankrupt – which was a gigantic commodities firm –
there was a lot of artificial forced liquidation of commodities. People
have to sell whether they like it or not. It’s artificial selling right now.
This happened before in 2008, when Lehman and AIG went bankrupt, they were
both huge in commodities and everybody had to sell. - in CNBC
*ETFs, ELEMENTS Rogers Intl Commodity Index - Agriculture Total Return ETN
(RJA), PowerShares DB Agriculture Fund ETF (DBA), iPath Dow Jones-UBS
Cotton Subindex Total Return ETN (BAL), Powershares DB Base Metals Fund ETF
(DBB)*
*... more »
Update On Jefferies
The SilverDoctors blog was the first place I saw this story (god knows I
don't watch Fox Business - not sure who does). It turns out that
apparently Jefferies CEO is looking for a large white-knight firm to take
them over. Translation: "our balance sheet is hopelessly insolvent unless
we get bailed out and I still might be able to sucker a big bank to buy our
firm while the stock still has value to insiders who own a lot." Here's
the LINK I would initiate an account transfer out of there tomorrow if I
had money at Jefferies...
To be quite frank, I'm not sure why Jefferies would... more »
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