Sovereign debt bubble thread

[Josquius]

Meh. That's a false friend. The German word for lend sounds like borrow, that's why I confuse it sometimes.

In northern English they're still interchangable.

[crazy canuck]

What happens if the Bank of Canada's balance sheet takes a hit? Do they just print money to fill the gap or does the government inject new capital? The latter is how it is done here, which would eventually make the tax payer liable again...

What do you mean by "takes a hit"?  How does the Bank of Canada ever take such a hit?

[MadImmortalMan]

Bwahahahaha!

Financial crisis forces Berlusconi to delay release of latest love song CD

Rolling economic storm clouds scupper the publishing date of the Italian prime minister's "True Love" album



The global financial crisis may have brought the eurozone to the verge of collapse, set stock markets tumbling around the world and pushed Greece to the brink of bankruptcy.

But these rolling economic stormclouds may contain a tiny silver lining: the downturn has reportedly prompted Silvio Berlusconi to delay the release of his latest CD of sentimental love songs.

Entitled True Love, the album – with words by the Italian prime minister and music by his long time guitarist partner Mariano Apicella – had been due for release in September, with a huge launch party planned in Milan.

But as he struggles to tackle Italy's massive public debt, hold together his crumbling coalition and defend himself in three trials, Berlusconi has been forced to push the release date back, according to the Italian daily La Stampa.

A former cruise ship crooner, Berlusconi teamed up on three previous albums with Apicella, who once worked as a Naples parking attendant before he was spotted playing guitar and invited by the prime minister to his luxury retreat in Sardinia to compose love songs.

Apicella and Berlusconi have since performed together at the Sardinian villa for guests including Tony and Cherie Blair, Vladimir Putin and George W Bush.

Apicella previously said the new album was ready in October 2010. On Wednesday Italian online music retailers were listing the latest release date as November 22. A spokesman for the prime minister declined to comment on the CD.

Angelo Valsiglio, another musician who has worked on arrangements, told an Italian music magazine Viva Verdi the album was a "really elegant and refined production with Brazilian hints". Touches of Neapolitan dialect are mixed into the lyrics and one track is inspired by Greek folk music, he added.

Berlusconi, who is currently on trial for paying for sex with an alleged underage prostitute, and has reportedly held "bunga bunga" parties for scores of young women at his villa outside Milan, has made no secret of his love of female company.

A sneak preview in La Stampa of one song, titled Music, reveals Berlusconi's lyrical style has lost none of its trademark passion.

"Listen to these songs, they are for you," it begins, "listen to them when you have a thirst for caresses, sing them when you are hungry for tenderness."

[Ideologue]

Meh. That's a false friend. The German word for lend sounds like borrow, that's why I confuse it sometimes.

In northern English they're still interchangable.

And often in southern American as well.  Convergent evolution?

[Neil]

Meh. That's a false friend. The German word for lend sounds like borrow, that's why I confuse it sometimes.

In northern English they're still interchangable.

And often in southern American as well.  Convergent evolution?

Scum is scum.

[Richard Hakluyt]

Meh. That's a false friend. The German word for lend sounds like borrow, that's why I confuse it sometimes.

In northern English they're still interchangable.

And often in southern American as well.  Convergent evolution?

Probably retention of an old way of speaking by both groups.

[Sheilbh]

Isle of Man and Guernsey have been downgraded!  Sterling-periphery's looking shaky

[citizen k]

Et tu Belgium?

BRUSSELS (AP) — Standard & Poor's downgraded Belgium's financial standing Friday, citing the country's government stalemate and a looming European recession.

Spurred on by the ratings agency's cut, six leading parties hurriedly resumed talks to agree on a 2012 budget to contain Belgium's high debt and deficit, two more reasons why the country has come under increasing pressure from financial markets this week.

In a sign that financial contagion is spreading across Europe, the agency cut Belgium's credit rating from AA+ to AA, a move coming two days after Germany fared surprisingly poorly at a bond auction.

Belgium has been without a permanent government for 530 days, as a series of negotiators has struggled without success to bridge the country's divide between its French and Dutch speakers.

"In our opinion, protracted political uncertainty remains a risk to its creditworthiness," the ratings agency said.

Caretaker Prime Minister Yves Leterme said "we really need strong signals now" from the six political parties trying to resolve the 2012 budget. He said the six parties needed a deal "tonight, the coming days — but preferably before we hit the market again" Monday.

After negotiators reached a constitutional deal two month ago giving regions more autonomy, talks are now stuck over how much austerity measures and increased taxes should be part of an euro11 billion ($14.8 billion) package to keep spending within limits.

"Now the time has really come for parties to take up their responsibility and form a government with full powers," Leterme said.

In a statement, Standard & Poor's said Leterme's caretaker government "lacks a mandate to implement deeper fiscal and structural reforms."

The country's yields on long-term bonds are closing in on 6 percent — getting closer to the 7 percent financial danger zone that has pushed other European nations into international bailouts.

"If we have to go to the markets next week to refinance our debt, the downgrading could make sure that we have to pay an even higher price," Leterme said on VTM network.

Leterme aims to get the budget deficit down to 2.8 percent of gross domestic product in 2012, but the European Union is far from convinced, forecasting a wider shortfall of 4.6 percent for the country. It is also forecasting that Belgium's debt-to-GDP ratio will break through the 100 percent barrier in 2013 without big budget reforms.

The record-long negotiations since the June 13, 2010, election have been hobbled by fundamental differences over Belgium's future. Some pundits have predicted the split of the kingdom of 6.5 million Dutch-speakers in Flanders and 4.5 million French-speakers in Wallonia.

[citizen k]

Italian, Belgian Yields Rise; Bunds Sell-Off
Reuters

Italian two-year government bond yields rose to new euro era highs above 8 percent on Friday after a weak sale of T-bills and zero coupon bonds and despite the European Central Bank buying debt in the secondary market.

Italian bonds of other maturities were also under pressure, as was Belgian debt, with the 10-year OLO spread over Bunds widening to 368 basis points.

The German Bund future  fell to a session low of 134.45, down 60 ticks on the day, with trade thinned one day after the U.S. Thanksgiving holiday.

The cost of insuring against a Belgian default hit a record high of 407 basis points, up 14 bps on the day.

"It's all over the place at the moment," said a trader.

"I think Belgium will be included in the ECB buying program...I don't see how they can avoid it now that yields are getting up towards 6 percent." Belgian 10-year yields  were up 6 basis points at 5.82 percent, ahead of a bond auction on Monday.

[Crazy_Ivan80]

Et tu Belgium?

BRUSSELS (AP) — Standard & Poor's downgraded Belgium's financial standing Friday, citing the country's government stalemate and a looming European recession.

Spurred on by the ratings agency's cut, six leading parties hurriedly resumed talks to agree on a 2012 budget to contain Belgium's high debt and deficit, two more reasons why the country has come under increasing pressure from financial markets this week.

In a sign that financial contagion is spreading across Europe, the agency cut Belgium's credit rating from AA+ to AA, a move coming two days after Germany fared surprisingly poorly at a bond auction.

Belgium has been without a permanent government for 530 days, as a series of negotiators has struggled without success to bridge the country's divide between its French and Dutch speakers.

"In our opinion, protracted political uncertainty remains a risk to its creditworthiness," the ratings agency said.

Caretaker Prime Minister Yves Leterme said "we really need strong signals now" from the six political parties trying to resolve the 2012 budget. He said the six parties needed a deal "tonight, the coming days — but preferably before we hit the market again" Monday.

After negotiators reached a constitutional deal two month ago giving regions more autonomy, talks are now stuck over how much austerity measures and increased taxes should be part of an euro11 billion ($14.8 billion) package to keep spending within limits.

"Now the time has really come for parties to take up their responsibility and form a government with full powers," Leterme said.

In a statement, Standard & Poor's said Leterme's caretaker government "lacks a mandate to implement deeper fiscal and structural reforms."

The country's yields on long-term bonds are closing in on 6 percent — getting closer to the 7 percent financial danger zone that has pushed other European nations into international bailouts.

"If we have to go to the markets next week to refinance our debt, the downgrading could make sure that we have to pay an even higher price," Leterme said on VTM network.

Leterme aims to get the budget deficit down to 2.8 percent of gross domestic product in 2012, but the European Union is far from convinced, forecasting a wider shortfall of 4.6 percent for the country. It is also forecasting that Belgium's debt-to-GDP ratio will break through the 100 percent barrier in 2013 without big budget reforms.

The record-long negotiations since the June 13, 2010, election have been hobbled by fundamental differences over Belgium's future. Some pundits have predicted the split of the kingdom of 6.5 million Dutch-speakers in Flanders and 4.5 million French-speakers in Wallonia.

it's a miracle it took this long

[KRonn]

Belgium now... and the "hits" keep coming.     Getting pretty alarming, so many nations, some with fairly large economies (Spain,Italy), in trouble. USA isn't getting any better quickly, and has a longer way to go to hit such troubles, but it's not out the realm of possibility that we could be in similar trouble too some years from now, if things remain the same path.

[jimmy olsen]

Belgae delenda est!

[MadImmortalMan]

Germany's last bund auction was a bit scary. They were only able to raise 2/3 of their target, and it's beginning to look like investment buyers are going on strike. I'll take Greek unions burning banks ten times out of ten over investors giving up.

[Neil]

Why wouldn't they give up?  Europe has chosen, much as the United States has, to run things into the ground until the government collapses.  That's democracy in action.  If an investor figured that the end might be coming within their lifetime, then why would they buy debt from those governments?

[Sheilbh]

Germany's last bund auction was a bit scary. They were only able to raise 2/3 of their target, and it's beginning to look like investment buyers are going on strike. I'll take Greek unions burning banks ten times out of ten over investors giving up.

My understanding is that it looked scary from the outside but wasn't that scary in the context of German auctions in general:

In Germany the debt auction process is similar to other countries'.  Dealers can bid with size and price. The difference is that in Germany, the Debt Agency (Finanzagentur) will retain part of the new issuance all the time, usually 15-20%, so they do not need full demand to issue. Also, the requirement to be a dealer in Germany means making sure of a minimum allocation across auctions that is relatively low (0.05%), while in other countries this requirement is higher (3% for example in Italy). Germany doesn't grant greenshoe options to its dealers. Other countries do. A Greenshoe option gives the dealer the right to buy the bonds for a few day after the auction at the same price of the auction. Overall this means that demand for German auctions will tend to be lower—all else equal—than for other countries' auctions. Since 2008, Germany has seen uncovered auctions 1 out of 5 times.  Today's retention amount was large, 39% of the 6bln target.

    The Finanzagentur issued only 3.9bln cash. They gave 3.9bln bunds to the market and kept 2.1bln bonds on their books. In the future they can sell this retention amount into the secondary market, raising cash. You may have read that the Bundesbank bought the unfilled part of the auction; this is not correct. The Bundesbank is not financing Germany; it just operates as an agency for Finanzagentur. It is worth repeating that Finanzagentur always retains part of the bonds, so this part of the process is normal. Today the retention was larger than usual. This is probably due to low liquidity across market, lower incentive to place certain minimum size bids by dealers, and richness of bunds in general.

It does have that terrifying WW1 feeling about it though.  That people will look back in a hundred years and wonder how governments (Germany) could be so stupid as to let this happen.