I’ll let the traders figure this one out

Don't worry, someone's covering our rear

Yield on Spanish debt fell today at the weekly (?) auction. In fact, the results of that auction are driving the DOW up. I would think that a lower yield means buyers perceive less risk, right? But also today, Spain’s central banker stated that the country is “back in recession” The prospects look dire yet the traders pile in. So they’re counting on another bailout coming, I suppose. They may be right, but I wonder whether anything is “too big to fail” these days, and if so, how long taxpayers around Europe and in the US will agree.


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3 responses to “I’ll let the traders figure this one out

  1. Hedgie

    In plain English, it’s all a big ponzi scheme. The Spanish sovereign bonds are being artificially supported indirectly by the ECB which is lending money to Spanish banks at 1% so they can go out and prop up the bond market. The US markets breathed a sigh of relief today and rallied. By the way, the US markets have been artificially pumped up by “Quantitiative Easing” or “Operation Twist” which are fancy terms for market manipulation by the Fed.

    The irony is, with goverment lead market manipulation running rampant, Obama proposed today to spend $52mm to supervise oil markets to combat manipulation by speculators. Such hypocracy!

  2. FlyAngler

    Chris: today’s auction in Spain was for their equivalent of Treaury Bills, out to 18 months I believe. Bill auctions are not great indicators of risk as proved by Greece when they had a bill auction come in at a lower rate than the last, just before they hit the shitter.

    Spain’s true test will be later this week (Thursday) when they have an auction for longer term debt. That’s one worth watching. Existing Spanish 10- years closed today just below 6% which is high but not critical, yet.

    Fwiw, the levels of credit default swaps on Spanish sovereign debt went down modestly today. Down is better than up as they have been almost constantly for weeks, but at 488 bps, that still elevated but nowhere near per-default Greek levels.

    Spain is a question of sloppy or orderly process, just as Greece was.

    In the end, the Euro as we know it is doomed.

  3. I like pig fannies!
    Thanks for the visual!