Well according to the news ALL the bond issues in Europe went really, really well. Italy, Spain and before them Portugal all sshrugged off previously failed auctions and this week, sold the max amount in well over-subscribed auctions (ie tremendous bid to cover ratios) at low rates – and for the Spanish auction, at least, the Spanish authorities said hlaf of the bidders were ‘non-resident’ buyers.
Now this is a turn around from the raft of failures and near failures of the previous month.
So I just wanted to say – not that I am sorry I doubted them, or sorry I was wrong about the state of their debts – but that I don’t believe this is the whole truth.
I am quite sure they all sold the bonds they say they did, at the bid to cover they reproted and at the yeild they reported too. What I can’t believe, is that this is, in reality, what it looks like – investors globally feeling confident about these countries getting their GDP/Debt ratio to where they say it is going AND to grow while enduring fanatical austerity measures. Sorry! I don’t believe that for a moment.
Which puts the onus squrely on me to explain the fact that the sales did happen as reported. I think the buyers will turn out to have been foreign CB’s or large European banks who bought the debt precesly in order to make sure there would be the positive news tht has been reported. But I think they will then have turned around and formed an orderly queue to sell these bonds to the ECB. Which the EBC will have agreed to do before a single bond was bought.
The bonds have been sold, don’t get me wrong. And the news is as good as reported, for yeilds, bid to cover and the rest. But I DO NOT think this is any real indication of bond market sentiment and confidence in these countries. It is the European version of how the FED bought up the large shares of every US bond aution for most of last year.
These were propaganda auctions. And the result is, the ECB or European CB’s just becoming a few more billions exposed to Spanish, Italian and Portuguese debts.
Cheer if you want. Count me out.