Spain pleads for ECB rescue as bond markets slam shut

The Telegraph ^ | 6/18/2012 | Ambrose Evans-Pritchard

[bruinbirdman]

Europe's leaders have vowed to mobilise all possible means to counter the region's escalating crisis after Spain's borrowing costs threatened to spiral out of control.

Yields on 10-year Spanish bonds surged to a record high of almost 7.3pc as investors ignored the victory of pro-bailout parties in Greece's elections.

The closely-watched two-year yield rocketed by 65 basis points in a matter of hours, signalling a near-total collapse of confidence in Spain's €100bn (£80.3bn) rescue from the EU last week to shore up its banking system.

Cristobal Montoro, the economy minister, warned that Spain is now in a "critical" condition and pleaded with the European Central Bank to act with "full force" to defeat markets hostile to the euro project.

Bank of America said Spain may need a second rescue to tide it through the next three years, pushing the total loan package towards €450bn – a sum that would test the EU bail-out machinery and cause serious knock-on effects for Italy. A draft communique from the summit of G20 leaders in Mexico said Europe will take "all necessary measures" to hold the eurozone together and break the "feedback loop" between sovereign states and banks.

A separate text for next week's EU summit vowed to "mobilise all levers and instruments", though details were thin. Italy said it would push for "semi-automatic mechanism" – probably involving the ECB – to cap bond yields of states in trouble.

Bill Gross, head of the world's biggest bond fund Pimco, told Bloomberg TV that Spanish bonds were no longer a "safe environment" and warned that Germany itself had become a "credit risk" as the crisis metastasises. Spain's economy is twice the size of Greece, Portugal, and Ireland combined.

Spain's financial daily Cinco Dias said the bond rout had been a "massacre

[mylife]

Well, They aint making no more of it.

[bruinbirdman]

"but moving much wealth from countries emphasizing manufacturing to those with greater emphases in tourism . . ."

Grease has a large military. Germany, France, Spain loan the Greasers teurdos so they can buy military equipment from same.

Grease also buys roads, airports, ports, etc. from EUSSR.

Grease loans are a grand euro employment plan.

yitbos

[RegulatorCountry]

True, but there’s a lot of it unless you’re in one of those largely federal owned states. Price goes boom and bust just like most everything else. I inherited the land I mentioned. It was purchased for less than $100,00 an acre originally, by my grandfather.

[RegulatorCountry]

That comma should be a decimal. $100.00.

[mylife]

Still, it seems like commodity’s is where you want to be.

[RegulatorCountry]

That’s certainly been the case thus far in this rolling financial crisis verging upon depression. Money’s flowing into the few remaining areas with consistent demand.

[mylife]

I was gonna say. ☺

[mylife]

Gnight gang.

[bruinbirdman]

"Where’s it going to run?"

Germany was the place along with UK. Now Deutschland is suffering the contagion.

Switzerland is too small and already has capital controls (pegged to the teurdo).

Japan was a haven that had to intervene to protect the yen (to no avail).

Australia? Canada? Too small.

China? They don't call it Communist China for nothing. The yawn is not even convertible.

How about the ruble, er rubble, nuff said.

U.S.A.? Always the haven with unlimited supply, political safety and ....................... liquidity!!

yitbos

[Teacher317]

Yields on 10-year Spanish bonds surged to a record high of almost 7.3pc as investors ignored the victory of pro-bailout parties in Greece's elections.

Amazing how blindly journalism majors adhere to their own lies, despite evidence to the contrary staring them in the face.

Hint: Investors didn't ignore the results at all.

[Varsity Flight]

No Fall Guy available (NLA). So giveway with no value. Watch the price of oil.

[Lancey Howard]

Meanwhile, the Nikkei is tanking, too:

[Lancey Howard]

Where’s it going to run?

Gold and land.

[familyop]

"Where’s it going to run?"

Back to necessities (commodities) and productive countries. Planners and building inspectors, for two examples of many, probably won't present much in the way of profits or useful products over the next decade or two.

[Varsity Flight]

Oil.

[familyop]

"China? They don't call it Communist China for nothing. The yawn is not even convertible."

Back around December, 2011, there was a rumor that the Chicago Mercantile Exchange was to begin accepting margin deposits in yuan. Will check up on that.

"U.S.A.? Always the haven with unlimited supply, political safety and ....................... liquidity!!"

True about liquidity, and we'll see "unexpected" amounts of that in the near future, IMO. Either that or the needed numbers of government funding cuts followed by an earlier general and realistic decrease in activity (to balance with real, domestic production). IMO, they'll (either party) eventually chicken-out from the April or May scaring of money from stocks and Europe to bonds (to pressure oil down) and go for inflation to prevent the larger funding cuts. Tourists didn't get much of a break on gasoline prices from the latest round, and government will gobble all of the funny money that is fed to her and more.

[familyop]

"Gold and land."

"Oil."

Both good answers, IMO--especially oil and large tracts of agricultural land, and even more especially if a large war develops.

[familyop]

"Real estate is a safe haven historically but that’s the original bubble that set the whole conflagration off in the first place, it’s still deflating."

Agreed on that, and it's going to deflate for a long time.

[rbg81]

I’ve thought for a while that these bailout band aids will continue through the 4 Nov elections. Basically, anything no matter how expensive or ludicrious will be initiated in order to keep the Markets “stable” enough to ensure Obama’s re-election. After that, however, watch out: the bill will come due with a vengence for all these Market distortions.

[RegulatorCountry]

Improving and stabilized employment with prices around 2.5 to 3 times annual income for the location, will be when and where it will stop falling.

Increasing rents could put a floor on it too assuming steady demand. It won’t fall through the floor barring a complete collapse. Then, all bets are off.