90 seconds at 9 am: Spanish bond market rout continues again as Euro-zone break up fears deepen; Moody's may downgrade Germany; Safe haven yields plumb depths

Here's my summary of the key news overnight in 90 seconds at 9 am, including news that fears of a Euro-zone breakup deepened overnight with signs of renewed capital capital flight from Southern Europe to safe havens all over the world.

The Spanish 10 year bond yield, a key measure of fear about a euro-zone breakup, rose to a record high 7.63% overnight. Italy's 10 year bond yield rose to 6.63%. See more here at Bloomberg.

Investors are pulling their money out of Spanish and Italian bonds and putting them either into Northern Europe, America and even into Australasia because they worry their euros will be devalued into pasetas and liras in any break-up. Fears of a Greek exit have returned in recent days as officials say Greece is behind its austerity targets and various Germany politicians are saying they are relaxed about Greece leaving the euro. See more here at Reuters.

However, Moody's reminded investors that a Greek exit and a Spanish bailout would not be painless for Germany, the Netherlands and Luxemboug. Moody's warned it may downgrade its AAA ratings on the Northern Europeans' bonds because of the potential costs of more bailouts. Crisis meetings were held overnight between Spanish and German officials about how to help Spain overcome its punishingly high borrowing costs. See more here at Bloomberg.

The US 2 year bond yield fell to a record low 0.22% after the second highest demand in an Treasury auction ever. The US 10 year yield fell to 1.39% as investors ignored the record low yields and opted for an asset they believed would preserve their capital rather than generate a return. See more here at Bloomberg.

International investors are also buying Australian and New Zealand bonds, pushing their yields to record low levels of 2.76% and 3.27%.

European stocks fell as much as 1% and the Dow closed down 0.8% on signs a synchronised slowdown would hurt company profits.  See more here at Bloomberg.

Apple surprised investors after the US market closed at 8 am NZ time with a weaker than expected result. Apple shares fell 5% in after hours trade. See more here at Reuters.

The New Zealand dollar dropped to 78.5 USc overnight, having edged over 79 USc late yesterday after Chinese factory output contracted less than expected. See more here in BNZ's currencies report on our site.

(Updated with more detail on US markets, Apple results and NZ$ moves.

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So the Ruining of the Bulls has come a little behind schedule...! Ole...!
Merkel sends Moody a WTF notice, while Moody's gives themselves a We Don't get Fooled Again Badge..........now everyone's a genius looking backwards..!
If it wasn't so dire, for sooooo many people....you'd die laughing.
The Greeks are finding the going too tough......geez give em some credit they lasted eight weeks...!....insolvent and unrepentant.....looking for the outdoor .....a more fertile ground for socialists could not be found.
 You got to wonder why they don't see the cycle of repetition they are doomed to repeat...?

Tribless a reply to your comment on obama and "you didnt build that" via fox, yet more porkies it seems.
"First, sure enough, the self-reliant businessman featured in Romney’s ads was the beneficiary of large government loans and contracts. This doesn’t make him a bad guy; pretending that he did it all himself does."

Here is a cracking perspective on the Eurozone has few options all of them BAD
Does the closing paragraph hint at counter positions in the light of probable outcomes.
The magnitude ..." it would require more money than has been printed in history"
I'll stay with my call..the Euro is a dead duck....... not dead yet....but it's a burning duck flapping around waiting to be stomped out by the Elephant in the room.
That's why they have big flat feet.....to stomp out burning ducks.

agreed, and the sooner it breaks up the better.
It will be painful, but is the only way

Perhaps the german politicians have the cart before the horse and should become comfortable with Germany exiting the euro.

Reading all comments from the last 5 days - time to draw up a ranking list of the most “Doomster & Gloomster – members” here.
Wolly, Andrew, Steven, SL, PDK, Bernard, Matt and me would certainly be among the top 10.
But unfortunately time is difficult for many and “doom and gloom” becomes reality for most.
Also interesting that some obviously have the ability to forecast events better then many of so called experts, politicians and policymakers.
…and often these people are called negative, unrealistic, funny even stupid. by the majority of the public.

Kunst - it's only 'doom' if you hang your hat on 'economic growth'.
For every other species, and for all our to-come future generations, the cessation of 'economic growth' is probably a life-giver. An absolute joy.

 PDK ..The problem with the concept of Growth is in the definition it has had assigned to it by both Economies and Religious organisations.......
Growth of the species by number does not necessarily enhance the growth of man in his ability to live in harmony with the rescources at his disposal.......to maintain the equilibrium that may aid the species to plan for distant tomorrows.
In fact the current growth of the species on the planet is inhibitive  to the ongoing wellbeing of the species on almost every level you care to name....a collision course with our demands.
As long as percentages define Markets there will be no change in that course ......save intervention by natural occuring events....? or of course....a re-enacted Big Bang.

The 4 horsemen cometh.
Dunno if this makes sense but I just found it....havnt watched it yet...

Stay Well Walter..!....and go carefull on the yellow stone......although nothing is safe....people still gotta eat.
 On the predictive thing , I just happen to have been reading some of Steven's stuff from 54 weeks ago....and to his credit ...on the money with analysis and predictive outcome...regards the RBNZ and their habitual loitering..
 I've got a really interesting piece about Australian Banks exposure to the Euro, I'm saving it for Big B's top ten.......I guarantee an informative read.

Hey, what's with including Me in your list.  And nobody has called those listed funny

So once you accept that the system we have is useless, even corrupt and definately failing... Its time to figure out a better one, and that is the first part of the hard part.....the second part is getting those still in denial to move/change.

Aren't we all SoreL.....are not we all...?

SoreL...enjoyed your interview with Bernard over at the latest BB baiter thread..what was it called..?" Let me put this another way or something ",...I don't recall....anyhoo I was quite taken back with the frankness of his responses to some probing questions on your part there.
There was a picture I developed from that seemingly innocuous encounter.....where a number of things finally fell into place for me.....a whole new perspective on who I think I'm dealing with sometimes and how they arrive  at certain conclusions.
 Yes....your moment there with him was certainly enlightening to say the least.
I used to think moving copy was the motive......get the hits.....y'know....., I don't think so anymore.....
But as they say.....he still has the microphone and that's almost as good as the high ground.

Your perspective? I had a picture of an economics graduate in agriculture who found his way into journalism and took off to explore the world with stints in Australia, Canberra (press gallery) England and France. (how many years?) then back to nz with Fairfax. A sort of gallivanting around the world. Lifestyle choices. On returning to NZ, bought first house in 2005 at age 38, with residual (limited) equity, then while exoriating the the hoi poloi that property prices were going to collapse 30% saw himself staring down the barrel of a potential wipe-out, handing the keys back, and owing the bank.

You've covered the mechanics of it iconoclast.......I was referring to the historicals impact on ideology and outlook.......always the bridesmaid...never the...

Alone this would be insufficient to call it a recession, which is a loosely define term to begin with.  Many economists would say either two consecutive quarters of negative growth (contraction) or a 1.5% increase in unemployment.

Can someone help me. Our neighbors here are a young couple,mid 20's, she a good looking girl. They smoke a bit of  marijuana in the evenings. We live in a nice area so they are the odd ones out. When Im took a shower this morning the window in the bathroom looks over their back yard,they were using a glass pipe and smoking something that made them cough like they were going to die,must have been a good experience as they kept on doing it. What the hell are they on? 

If they were applying heat to the bottom of the pipe it is probably crack cocaine or crystal meth. If they were lighting the substance itself then exhaling large volumes of smoke could be chop, finely cut cannabis head mixed 50/50 with tobacco. (Gives a big rush and the stone lasts longer than straight dope. Wickedly addictive and murder on the lungs.)

What a tragic waste of two young lives. I will watch next time I see them and report back.

Andrew with it being a clear pipe my bet is "P". Really nasty stuff mate and I have first hand experience on the tolerance to pain they can have. With a normal person the affects of adreneline wear off after a conflict, not so with "P". Worst bit is they may resort to crime to support the habit. 

Im only here for two more weeks, but how do you help them, drugs are such a big problem in California. People respond by buying another gun, a bigger one than the last.

Well I really don't know about how to help, I don't have experience of that unfortunately. Whatever you do, if you do anything, is that be clear they are addicts and that "P" is horribly addictive from the first try of it. Perhaps if anything inform their parents, if it was one of my kids I would want to know before it got too destructive for them.
If it is cocaine then the trick to tell them that it will ruin his sex drive, permanently! Not sure if that holds for females.

Andrew, Andrew – bring your family back home – be happy - http://www.youtube.com/watch?v=9qs5dqYLX9g

Sounds to me like you've witnessed someone committing a crime.
If it was my next door neighbour - I know what I'd do .. and it wouldn't have anything to do with trying to "help" them.  Could be they are cooks and stepped outside to 'test' the product so as not to risk blowing themselves up :-).
Nice neighbourhoods are the perfect place to manufacture.

Its a tragedy, I think her mother was here last week, in a brand new Jaguar car, she stayed for a couple of days so I dont think they are manufacturing P in the house. Just a couple of good kids with a student loan and  crap jobs, looking to escape for a bit. Trying to see a future but running into brick walls. Not the life they dreamed they would be living.Not the life the university promised.

I was gonna let it slide A.J. but can't help myself I guess.
N.Z. has one of the worst drug cultures in the OECD , although P is in decline it had reached epidemic proportions as recently as 2009.
E is back with a vengence and so is coke.....trends eh..?
 It affects every level of society not just the average Joe.....I have first hand experience of people I have known including a lawyer...buisness owners ...accountants...who have all become casualties to their drug of choice. and unfortunately that was P.
As to the dope thingy....no biggie, been around for centuries in cultures that don't abuse the opportunity to indulge...
 I find it comical when Christian based economies accept alcohol as a legitimate form of altering your state of mind given the associated violence and decimation it causes in all walks of life....f..ing hypocracy.
If you want to review a crime wander up and ask some Mohavae or Yuma Indians about what it was that so decimated their people...............alcohol.
Or maybe some Aboriginals in Aus.........................good ol white mans poison. enshrined in law as good for all.
Not a rant in favor of drug use , just a snapshot for balance in the picture...N.Z. is no different to the U.S. or any other developoed country in that respect.....just economies where drug and alcohol cultures can thrive.

.....just economies where drug and alcohol cultures can thrive.
... and tobacco smokers are demonised.
I believe this is the very reason the Maori Party are going hell for leather on their anti-smoking campaign - it takes the spotlight off the drug and alcohol abuse stats which are the real problem afflicting tangata whenua.

Andrewj they are probably acting so to support the US banking system.  So they are bound to be nice. True patriots.
Marijuana is reputed to be the largest cash crop grown in the US and probably here as well. Laundering the cash is big business. Some commenters have gone out on a limb to say the drug cash liquidity is responsible for holding the stock market up in difficult times. And other shaky enterprises as well. There are too many to name them all.

God bless America, high on the consumption of cheap Chinese crap and Mexican weed.  Paid for with money borrowed of the Chinese and Japanese.
 Laundered by HSBC on behalf of us all. 

That sounds about right - makes Jamie Dimon look good and Jon Corzine not so bad. 

Paid for with money borrowed of the Chinese and Japanese.
You must understand the credit is created in the US first to enable the purchase of the foreign imported goods - the USD profit is that which the Chinese and Japanese have to contend with. As the US has no return exports to these countries, they end up buying Treasuries because their own consumers have no income to buy US priced goods.
This is the reason China is in shit - the US credit spigot to main street dried up.
Maybe you would smoke pot too if this is how it is.

Just keeping the tone

The euro has completely broken down as a workable system and faces collapse with “incalculable economic losses and human suffering” unless there is a drastic change of course, according to a group of leading economists.

"In a veiled rebuke to hard-line politicians in Germany, the economists said the root cause of the crisis has been the boom-bust effect of rampant capital flows over the past decade – not delinquent behaviour by feckless nations. “The extent to which markets are currently meting out punishment against specific countries may be a poor reflection of national responsibility,” they stated."
Who would have thought that allowing banks and other large financial organisations to move massive amounts of money at will from currency to currency, asset class to asset class would be destabilising? Yet we still have a trader in chief who pretends to believe in efficient rational markets, equilibrium and all the other self serving tripe the neoliberals still trot out. All these crises are caused not by nations, but by greedy, corrupt, amoral market giants conspiring with tiny local oligarchies to loot and finally bankrupt entire nations and leave them with the debt (after shifting their own money of course)
After all that has happened and been exposed, who does the NZ government get to advise and handle the float of the asset sales (to the tune of $100m+) but the same guys that have looted and ruined most of the planet. Having raped the big guys, guess who the "wheat and chaffe" is? 

Ag machinery retailer in provincial city told me business is very slow. Almost non existent if it wasn't for delivery of tractors on orders made earlier in the year.  Said small machinery sales is the only thing going. Reason given by his farming clients for closing cheque books is high tax bills on falling payouts.  
Also commenting on the high commercial property rates increase in the city- 44% in his business's case. A 'toilet tax' was also the reason for a big increase in house rates. - The more toilets you have the more tax you pay - reminds one of the 'window tax' in days of old.

CO - they bricked up the windows to avoid payment. Does that give you an idea?????

It's simply encouraging a rise in the 'cash for services' economy pdk as Councils are rating people in to disobedience with nary a thought for what is actually affordable and with no thoughts of actually cutting back the fat in Council activities/costs. I don't live in the city I referred to or it's environs, so it doesn't affect me personally. :-)

Yes CO thats very much what I'm seeing as well, but I have a question for you...is there a trend with dairy farmers back  to a lower input lower cost simpler farming model?.. If so, is it just short term due to the 'best' grass growing season ever or have you and your brethren had enough of the bank dependence that high input op's require...?

Never been a follower of high input farming NeilD.:-)  With changes to the livestock valuation rules there will be some significant tax bills resulting from that I believe. Some areas had 'best' grass growing season, but it would be a folly to believe that all did.  For a few areas, that only applied to the autumn, after a rather dry spring or summer. I've just got back after three weeks away and I was surprised at how little grass there was on farms during the drive down from Auckland.
For those farmers (and Bankers) who see production as the holy grail, rather than cashflow, high input farming will always be on the agenda. But there are costs coming in to farming now that with lower payouts will force farmers to cut back and not just on discretionary spending. In the area I farm, 35 farmers are spending $3.8m on environmental works over the next two seasons. That is around $108k per farm. These costs are not discretionary and for some farmers they have been able to put some funds aside for this due to consents coming up for renewal, but for others this hasn't been an option as Regional Council have changed the rules and called in their consents. 
Environmental costs are a significantly growing cost for dairy farmers in the next 5 years in particular. Falling payouts, significant district council rate increases, significantly increased Regional Council rates and compliance costs, changes to livestock rules and tax, will, I believe, see more than the current 10-15% of dairy farmers struggle to have positive cash flows. With banks gushing to lend money to us, I also won't be surprised if we find dairy farm debt increasing.  The positive is that 50% of dairy farmers should be ok :-)
TAF may help out some of the Fonterra suppliers (if, and when, it is implemented) but one needs to remember that there is a limit to the number of shares that farmers can sell the economic rights to. If Fonterra does fund the Strategy Refresh via debt and raise debt levels from the current 39% up to 60% as some directors have indicated, we could in time have the perfect storm causing it's demutalisation - max company debt, falling payouts, inablility of shareholders to be cashflow positive. Interesting times ahead.

Thanks for the reply CO, thats a pretty good snap shot of the near term outlook of the industry..As I depend on farming for 100% of my income it's helpful to see where you guys are heading (correction: we depend 100% on Dairy farming as the drystock boys just don't spend any  more).
If as you say 10-15% of Dairy farmers are struggling now with up to half in the future, thats pretty damn scary. If a third of my client base will struggle to pay me on time thats a worry.
Theres alot of interest especially among the younger guys up our way in suppling the independent processors to get around the share issue. It makes leasing a farm a option again (due to the scarcity of sharemilking jobs), this is a trend that will continue....

I spoke to a mate recently who has moved from Fonterra to Miraka because of the share issue  and also because of TAF.  The question is: Will the corporates welcome new supply? Open Country is very  picky about who they will take on, Miraka is full, and Tatua has a closed door policy on new supply, preferring to take 50m DIRA milk instead of new supply. I have always believed the competition at farmgate is a bit of a Clayton's competition. Westland is the only company who is aggressively looking for new suppliers.
I have noticed an increasing number of retailers offering to have bill payments deducted via RD1 statements.  If that's an option for you, it might be worth looking in to. You get the $ before the farmers that way. I have the farm office phone paid to Telecom that way as it makes it easier to just have one statement to code for gst than having to go through the bank statement.  I get around $2.47/month discount from telecom for doing so. Convenience rather than discount is the major reason for doing it though.