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  • ECB intervening in Irish Government Bonds?

    Alexander Gloy

    Stock markets falling word-wide, bond markets surging (prices up, yields down) – except a few outliers, like Ireland. Take a look at the intra-day yield of 10 year Irish government bonds; big rise, then sudden stop. Rumors of ECB having stepped in and buying Irish government bonds. To me, the chart looks like those rumors…

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  • What happened to the PIIGS?

    Alexander Gloy

    What happened to the PIIGS (Portugal, Ireland, Italy, Greece, Spain) – they have disappeared from the headlines recently, but there seems to be “life” coming back to bond spreads. Today 10yr spreads to Germany widened in France (+3bps), Italy (+7), Spain and Greece (+14 each). Credit Default Swaps for several countries and some of their…

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  • How much longer will stocks be able to ignore signals from the bond market?

    Alexander Gloy

    FOMC (Federal Open Market Committee) met today, announced the reinvestment of maturing mortgage-backed securities into longer-dated Treasury bonds (2-10yr). Fed language unchanged (“to keep interest rates low for an extended period”), but economic outlook a bit gloomier. Bonds rallied, with US 10yr yield down to 2.78%, but stocks closer lower. This is logical, as no…

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  • IMF talks with Hungary suspended

    Alexander Gloy

    The IMF on Sunday suspended talks with Hungary over disagreement on 2011 budget deficit (Hungary wants more than 3.8%, IMF says 3% max). Hungary had asked for EUR 20bn from IMF, EU and World Bank in October 2008 after other sources of financing dried up. It is highly unusual for a country to let negotiations…

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  • Are Italian banks failing stress tests?

    Alexander Gloy

    Bank of Italy Governor Mario Draghi said he was “amazed by the fantasy” of a press report today saying that stress tests of the country’s banks showed that three of the nation’s biggest lenders may need to raise 25 billion euros in additional capital. Draghi said at a press conference in Rome that stress testing…

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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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  • 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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  • 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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