In Euroland read the small print and follow the doctor's orders

Around 6:30 am today I heard the BBC business reporter saying the latest Spanish, Belgian and Irish bond offerings had been gobbled up by the market. A fishy tale, who would want such rubbish other than banks in Spain, Belgium and Ireland who could immediately get their money back by repo-ing the bonds to the ECB at 1% and making a nice turn in the process. I checked with Reuters on the Spanish offering and found that they were not bonds but 12 and 18 month T Bills. Generally anything less than 18 months maturity is called a Bill not a Bond and what about the interest rate?

The 12-month Spanish bill,  paid an average yield of 2.303 percent after 1.59 percent in the same auction in May, and the 18-month,  2.837 percent, up from 1.951 percent in the May offering. A month is a long time in the Bill market.

"This begs the question how Moody's can rate Spain triple-A when you have an auction result like this. While Spanish 12-month yield was 2.30 percent, France's equivalent is 0.4 percent and below the ECB's policy rate of 1.0 percent. This must now put pressure on Moody's to downgrade Spain," said bond strategist at Monument Securities in London, Marc Ostwald.

Very true. At 10 years the bund spreads are now Greece 7.3% , Spain 2.1% and Portugal 3%. These steadily increasing spreads indicate a higher and higher market expectation of defaults. The test will come on Thursday when Spain has a more important 10- and 30-year bond auction  to repay a 16.2 billion euro redemption due by the end of July. No doubt Spanish banks arms will be twisted to punt in but I opine these bonds will  end up on the ECB books faster than a Nadal forehand.


Personally I believe George Soros who on Monday said " Europe faces almost inevitable recession next year and years of stagnation as policymakers' response to the euro zone crisis causes a downward spiral."

It seems that Bismark Merkel has vanquished Napoleon Sarkozy. The German £66.5 bn austerity model will prevail. Rules will be enforced and red cards shown to the transgressors. Sarky's capitulation was described as a climb down but surely as the hymn says, ' He who is down needs fear no fall'. However not to be out done Napoleon later announced his own £83 bn austerity drive. Merkel has been criticised in Germany for letting herself be bullied by the little frog. Time for the jack boot it seems.


The most depressing thing for me occurred on Andrew Neil's Daily Politics today. Neil's lead in was that Obama was way out of order in comparing BP's accident in the Gulf to the terrorist attack of 9/11. One was an accident and the latter a pre-mediated plot to kill thousands of people. Neither of our 'leading' politicians on the show, Francis Maude (Con) and Yvette Cooper (Lab) would condemn Obama's intemperate provocative and inaccurate rhetoric which is so damaging to BP a core UK company. It is as I wrote on Monday our craven Spad politicians have given our country away and will not stand up for our own people. As John Laurie would say we're doomed.