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Blain: “Who Will Purchase The €275 Billion Of Debt Italy Expects To Issue In 2019?”

November 21, 2018

Blain: “Who Will Purchase The €275 Billion Of Debt Italy Expects To Issue In 2019?”

Gamma Ray Bursts, El-Erian on market disruption, Tech Stocks and Italy Bonds.

“I’ve always admired Capital Mainwaring.” [I don’t!]

I must stop reading newspapers. They are scary. Why worry about stocks and bonds when we’ve apparently got a pinwheel Nebula spinning at 12mm km/hour, named after the Egyptian God of Chaos (Apep), about to go Nova and its practically right next door – only 8000 light years away! That’s like the desk next to me in galactic terms! If a Gamma Ray Burst from such an event hit we are all literally toast. Global Crash or Supernova? You choose. (https://www.thetimes.co.uk/article/dying-star-could-be-a-time-bomb-rgrw2mvkq)

Rather puts things in perspective….

But, let’s assume a Supernova is not going to happen before I collect my pension.. so back to the day job.

Another bad day in stocks and still it’s the Tech companies that are leading the downside. Oil is taking a spanking, and if there was anything positive to say about the bond markets, bless me, but I can’t find it.

The papers today are full of fear… “buy-the-dip no longer working”, “short-sellers squeezed”, or “Tech Skid Becoming a Full-Blown Crash”. The extraordinarily cold weather in the US, and the threat it raises to the masses going Black Friday shopping, is being touted as yet another nail in the stock-market coffin.

However, relax. It all makes sense. Kind of.

In the FT there is a rather good article by Mo-the-Tash (sorry if anyone is offended by the nickname we’ve given Mohammed El-Arian – but its affectionate!) Let me give you a random sprinkling of phrases from his article “Risks rise for investors as developed economies falter”

…click on the above link to read the rest of the article…

From “Doom Loop” To Just “Doom”: Italian Debt Faces A “Huge Structural Shift”

August 16, 2018

From “Doom Loop” To Just “Doom”: Italian Debt Faces A “Huge Structural Shift”

At the start of July, we revealed that a familiar force had returned to Europe.

According to ECB data, during May when the market saw unprecedented Italian government bond turmoil, Italian bank holdings of domestic government bonds showed record buying over the month at €28.4bn, higher inflows than those seen during the European sovereign debt crisis of 2012. Visually, this is what the single biggest month of Italian bank purchases of BTPs in history looked like.

This vicious circle of Country X banks (in this case Italy) buying Country X bonds during times of stress – with the backstop of the ECB –has for years been Europe’s dreaded sovereign bank doom loop. And, as Italy clearly demonstrated, repeated and aggressive attempts by European regulators and policymakers to finally break the doom loop, most recently with the introduction of the 2014 BRRD directive, which sought which sought to remove the need for and possibility of bank bailouts, and instead ushered in bail ins, have been an abject failure.

It is also a major problem.

In a note published by Goldman on Wednesday, the bank’s Italy analyst Matteo Crimella writes that “regulatory and supervisory changes, together with the risk of a deterioration in banks’ capital ratios/ratings owing to weaknesses in the sovereign market could, all together, raise the bar for domestic banks to step in as buyers.”

In other words, Italian lenders may no longer be as willing to snap up domestic government bonds during market stresses, something which Bloomberg calls “a potentially huge structural shift in demand in the euro area’s second-most indebted nation.”

…click on the above link to read the rest of the article…

Olduvai IV: Courage
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Olduvai II: Exodus
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