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  • A failed auction at the ECB spells trouble

    Alexander Gloy

    The European Central Bank just experienced a failed auction. A failed auction means that you did not achieve to sell a predetermined amount of securities to the market. Here, the ECB wanted to mop up EUR 55bn in liquidity (to “sterilize” a similar amount of European government bonds they bought) and received bids for less…

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  • Joke du jour: Greece to tap markets for more money

    Alexander Gloy

    “Greece will go to the markets mid-July, issuing T-bills of three, six and twelve months,” Deputy Finance Minister Philippos Sachinidis told Reuters. Wasn’t the EUR 110bn bail-out meant to prevent Greece from having to raise money in the market until 2012? And isn’t their fiscal consolidation program “ahead of the plan”? Seems that is not…

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  • Swiss Franc strength versus Euro unstoppable

    Alexander Gloy

    Despite the SNB having accumulated weak currencies amounting to half its GDP the Swiss Franc is still in high demand: Source: ForexHelp.com

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  • G20 bond victory – stock market ignores reality?

    Alexander Gloy

    The G20 meeting in Toronto brought a slight victory for bond owners as governments agreed the obvious – current deficit levels are unsustainable. The meeting asked all countries to follow “growth-friendly fiscal consolidation plans”, which is a perfectly impossible. The plan is to halve deficits by 2013 and stabilize the ratio of debt to gross…

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  • Greek CDS blow-out

    Alexander Gloy

    On Wednesday Greek CDS (Credit Default Swaps) blew out to a new record of 1,118 bps (+184): Source: CMA This implies a 68% likelihood of default, topping even Venezuela (59%) and Argentina (49%). With interest rates above 10% it is mathematically impossible for Greece to repay EUR 450bn of debt (or 150% of GDP). I…

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  • Red flag alert: Greek 10yr government bond yield surpasses 10%

    Alexander Gloy

    Greek 10yr government bond yields today reached 10.37% (+0.60) as credit default swaps (cost of insuring against bankruptcy of the Greek government) rose 85bps to 940. Even 2yr bonds yield 9.78% (+0.57) – a time period presumably covered by the European bail-out package. Spain (10yr 4.52% +0.07), Italy (4.04% +0.07) and Portugal traded wider compared…

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  • Swiss Franc exchange rate controls – 1971/2 deja vu?

    Alexander Gloy

    After having spent half of Swiss GDP on intervening (unsuccessfully, see chart) in the foreign exchange markets the SNB (Swiss National Bank) is at the end of its wit. Source: Forexhelp.com If you’d like to know what’s next in store you only have to go back 40 years: April 30, 1971 – Rich Germans have…

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  • Euro crisis not going away – when will Greece be allowed to default?

    Alexander Gloy

    The love affair with Spanish debt (after recent auction) was short – the 5yr CDS (credit default swap) rate short up to 250bps (+30) today (see chart). Source: CMA Meanwhile Greek 10yr bonds widened to 9.77% (+0.29) compared to Germany’s 2.69% (-0.07). This crisis is not going away, and the market does not seem to…

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  • Greece replaces Argentina in ranking of sovereigns likely to go bust

    Alexander Gloy

    Greek 10yr government bond yields 9.48% (+0.07) today – on their seemingly unstoppable march towards double digits. If everything goes according to plan (which it never does), Greece’s debt-to-GDP ratio will peak at 150% in 2012 or 2013. Hence if you pay 10% interest on your debt you need to fork over 15% of GDP…

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  • GLD now the world’s second largest ETF

    Alexander Gloy

    GLD is now the world’s second largest ETF (exchange traded fund) with 1,308 tonnes of gold worth $51bn (SPY is the biggest one with $83bn). Governments finally realize that too much debt leads to default. Now they try to tighten the fiscal belt. All that it left to avoid financial disaster is “quantitative easing” (=…

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