Here's my summary of the key news overnight in 90 seconds at 9 am, including news the yield on Spain's 10 year government bond yield hit 6.47%, which effectively means the Spanish cannot borrow anymore at a sustainable interest rate.
The spread between the Spanish 10 year bond yield and the German 10 year bund rose to a euro record high 514 basis points in another indication of extreme stress in European bond markets that is causing a wholesale run in funds from Southern European bonds into German bonds on fear of a euro zone breakup. See more here at Bloomberg.
The spike in Spanish bond yields came after news Spain plans to inject 19 billion euros of bonds into the balance sheet of Spain's third largest bank, Bankia, so Bankia can then use the bonds as collateral to borrow cash from the European Central Bank. This was seen as an attempt to avoid having to raise non-existant cash in Spain and arrange a back-door bailout via the European Central Bank. See more here at Bloomberg.
Concerns are also growing that other Spanish banks will need bailouts. FTAlphaville reported from a Nomura research note showing Spanish banking giants BBVA and Santander, along with other struggling regional banks, need 40 billion to 50 billion of capital injections. Nomura reported Spain's banking system could need a further 220 billion euros in capital if a tougher measure was used for provisions for losses on Spain's collapsing property market.
Spanish stocks fell 2.2% overnight, including a 30% fall in Bankia shares.
As if it couldn't get worse for Spain, prices of olive oil have slumped to a 10 year low after a bumper crop from Europe's largest producer. See more here at FT.com
Meanwhile, US markets were closed overnight for Memorial Day holidays. Currencies were steadier with some hopes that pro-bailout in parties in Greece may win June 17 elections, given they are ahead in the latest polls. The chances of a 'Grexit' from the euro zone are seen lower if the pro-bailout parties win.
The New Zealand dollar was firm and steady over 76 USc in morning trade.
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7 Comments
More here on the Pain in Spain from Reuters. It is just plain ugly.
http://www.reuters.com/article/2012/05/28/us-spain-finances-idUSBRE84R0…
Having dropped to around 4.7 percent earlier this year, helped by the ECB's creation of a glut of three-year money, 10-year borrowing costs are now approaching 6.5 percent and closing in on the 7 percent level widely seen as unsustainable. <MKTS/GLOB>
Ireland and Portugal were frozen out of capital markets and forced to seek international bailouts soon after their yields topped 7 percent.
The government said last week its highly indebted regions faced 36 billion euros of debt refinancing bills this year, way above the previously stated 8 billion. Catalonia said it was running out of options and needed central government help.
A plan to recapitalize Bankia with Spanish government bonds, which the bank could then use as collateral to get cash from the ECB, could add to the government's refinancing problems.
Spain's Treasury insisted it would repay debt maturing without problems.
"We are in a very strong position (to meet debt maturing shortly)," said Ignacio Fernandez Palomero, deputy director of public debt at the Treasury, pointing to redemptions in July and October, when Spain has big amounts due.
Spain's central government and regions need to refinance 117.5 billion euros of debt by the end of the year, while funding a deficit worth 52 billion euros.
Oooooooh , shag ..... all those enterprising Kiwi farmers who switched into olives , after the truffles didn't grow , and the ferrets all ran away with the ostriches , after eating the gogi berry bushes ......
...... you're stuffed ..... again ....
Hmmmm , stuffed olives ...... yum !
You missed grapes........seems there are a lot of followers of ideas and not makers of ideas...funny that ppl claim that the Govn is bad at business, yet it seems many businesses and bad at it as well.
BTW, the NZ olive / olive oil is pretty good, just look at the scandles coming out of the Med over rancid olive oil....and what happened with china and milk....
So we might actually see a boom for niche and quality becasue of our rep.......I certainly hope so...
regards
Difference is, of course, business failures are part of Schumpeter's Creative Destruction. A few years on, you'll drive past the ex-grapery and say - 'hey, didn't there used ter be grapes in 'ere?'
Whereas a failed idea by a Gummint takes a leetle longer to root out.
And doing the drive-by and asking the question '
hey, didn't this show used ter have a Gumnut?'
is a rather more Fraught Operation.....
Ive a friend who is a property investor mostly lower end. Told me yesterday that the market is getting hot. Sales are above asking prices at auction, lots of buyers and he has been pushed out. He thinks its the low interest rates driving it and he thinks we are going to have another bubble in housing. Happy days, get in quick.
Meanwhile in the real world
>>>
Debt crisis: a $46 trillion problem comes sweeping in Bad stuff, they say, comes in threes. We've already got the banking and the eurozone sovereign debt crises. Next comes the corporate funding crisis.
http://www.telegraph.co.uk/finance/comment/jeremy-warner/9296117/Debt-c…
A great link, thankyou....Corporate bonds...LOL...or maybe that should be "oh god"....the next financial sector debacle......
Lets see share price is dependant on growth and there isnt the energy for that let alone the fact there isnt any grwoth foreseeable out some years. So share price is going to go south.....just who then buys corporate bonds.....nasty losses potential in there.....if no one buys what happens next huge defaults? guess so...corporations cant print....they can lie as they have been doing....but that only works for so long....
Just keep buying GBH....buy lots....
regards
Piece of Cake Andrewj - they will just order up negative interest rates and print - plenty of so-called independent, well paid apparatchiks to do the governments' dirty work. Just don't get caught exchanging your time and effort for money. That's the really big losing trade for the majority in the world of corporate welfare.
I can highly recommend under employment.
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