Yesterday in ‘More Bad Signs in Euroland’ I mentioned how Spain had had a Bond Auction fail. Not that it was reported that way by the mainstream – but then truth is no longer their function in this time of crisis, is it?
I also suggested that the ECB would have to be on call to perform the customary miracle after a bond market fail or near fail, a sudden SUCCESS to raise the spirits and restore confidence. Somewhat akin to how the loyal press reported on the heroic victories of the German army in 1945.
Anyway, enough insensitive analogies. Today, as expected the miracle happened. Spain sold €3.52 billion in 10 year bonds. AND the sale was well attended with twice the bids necessary ( Bid to Cover 2:1) SO there! What was the market thinking yesterday when they wouldn’t buy any lovely Spanish debt? SIlly billy Bond buyers.
Do these people think we are all simpletons!!
Yesterday NOBODY wants even short term Spanish debt even at a very high yield. And today they are falling over themselves. What, today they found a message from the tooth fairy under their pillow saying everything will be fine?!
Let’s look a little more closely at the details of the sale which are rather sheepishly dropped in near the bottom of the report.
The yield was 4% up from 3.8% only a month ago. So the rate is accelerating up. Like Greece? Check!
The buyers – and this is the clincher – were according to traders, were a lot of ‘domestic banks and funds’.
Domestic banks and funds – Oh that’s good right?
Didn’t we find recently that Greek banks had bought lots of Greek sovereign debt? And we all wondered how stupid Greek banks could possibly be. Question for you which Spanish Banks and funds. BBVA is hurting with large non-performing loans. Santander is looking a little queezy despite getting regular infusions from its South American subsidiaries. And the rest of the Caja savings bank system is already broke and the central bank is looking to bail them out, merge them or close them.
So who bought all these bonds, with what and why?
My guess the all bought the debt with Government’s money and at the Government’s command. The bonds will now be taken STRAIGHT to the ECB and exchanged for Euros. A round about ECB bail-out for Spain. That is ALL it is. Oh and some lies for the press to feed to the open mouthed public.
I really don’t like being condescended to and treated like a simpleton.
No comments yet.