Spain

'The Emperor has no clothes'


What these commentators don't get is that growth is DEAD.


Spanish banks downgraded as country awaits rescue package

Fitch credit agency has downgraded 18 Spanish banks less than a week after downgrading the country’s credit ratings. This comes amid discrepancies regarding the rescue package EU is to provide for Spain.

RT,

12 June, 2012

The agency’s decision stipulated the highest borrowing rate in the country since it joined the eurozone.

Fitch also said it had carried out stress tests, both on the Spanish banking sector as a whole and on individual banks, updating the test results from 2011.

According to Fitch the capital needs of Spanish banks is as much as €60 billion under a “base case” scenario.

Meanwhile, Spain has applied for a European bailout of as much as €100 billion to support ailing lenders and eurozone finance ministers have agreed to provide this package.

The exact amount of the loan will be determined later this month after independent audits are completed.

Spanish authorities claim that the package is to be provided with no additional conditions imposed on the Spanish economy.

Some, however, refuse to believe this, saying that if it is true, it will outrage Greece, Portugal and Ireland, who had to make drastic cuts to receive their bailouts.

John Hulsman, a political risk consultant, told RT that such assertions make Spanish PM Mariano Rajoy look either like “a fool or a liar.”

“The problem is, if you buy the Spanish prime minister Mr. Rajoy`s narrative, of course everyone is going to say why do we have tough terms and Spanish have easy terms and it leads to even more acrimony in the EU.”

Fitch Managing Director Says Spain Will Miss Budget-Deficit Targets By "Substantial Margin"; Yields in Spain and Italy Soar; Spanish 10-Year Yield Hits Record High 6.83%

The selloff on Spanish and Italian bonds continued today with yields in Spain hitting euro-era record highs.

Mish's Global Economic Analysis,

12 June, 2012

On the deficit side of matters, I do not believe Spain will meet its budget-deficit targets, and neither does Fitch.

Fitch Managing Director Ed Parker said Spanish Prime Minister Mariano Rajoy will miss budget-deficit targets this year “by a substantial margin.” according to a Bloomberg report.

10-Year Spanish Bond Yield Hits Record High

The previous euro-era 10-year Spanish Bond Yield high-water mark was 6.7%. That record was shattered today with a rise to 6.83%, closing at 6.7%, right at the previous high. The yield closed up 20 basis points (.2 percentage points).

Yields Climb in Italy

10-Year bonds in Italy were hammered as well, with the yield climbing as high as 6.3% before settling at 6.17%, up 14 basis points.

Emperor Has No Clothes Moment 

Yesterday, on news of a Spanish bailout, stocks and bonds gapped up (yields down). The yield on the 10-year Spanish bond dropped as low as 6.01%, but the selling began immediately.

I commented that the sell-the-news reaction represented An "Emperor Has No Clothes" Moment: ESM Has Failed Already.

The jump from 6.01% coupled with significant follow-through today offers substantial evidence that time has expired for Europe to address the crisis.