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Friday, November 23, 2012

Looking to the New Year?

With trouble flaring up in Greece once more and the backstop of the ECB’s bond-buying (OMT) in place, Spain has slipped off the radar slightly. It now seems likely that any request for a sovereign bailout (of one form or another) will be pushed back until the New Year.

However, interestingly, Spain returned to the debt markets this week despite having its funding costs covered this year. It successfully sold almost €5bn worth of short-term debt on Tuesday and almost €3.9bn of medium and long-term debt yesterday.

This could mean many things, not least that the Spanish government is concerned about its cash position or the potential for unexpected costs (a regional or bank bailout for example), but we’re willing to give Spain the benefit of the doubt and see it as prudent planning to get a head start in covering its funding needs next year. This comes as somewhat of a relief given that gross Spanish funding needs could run between €150bn and €200bn next year.

On a separate, and slightly less positive note, the European Commission has, in a working document, questioned why the Spanish government has, in substance, refrained from intervening in those Spanish regions which are "clearly at risk of missing their fiscal targets in 2012" - despite legislating earlier this year to give itself such power? It is an interesting question, we would hazard a guess that the Spanish government is not ready to face the political consequences of such an action.

We can’t exactly blame them on this front but it raises the question of where their threshold is and what the repercussion of such an action would be.

As per usual from Spain then, a bit of a mixed bag, but at least it seems to be planning for next year. Now if only it took a longer term approach to its banking sector and labour market reforms…


Rik said...

It doesnot mean much at least not what most people think. This one has already ended up mainly as ECB repo material. The earlier long tem ome ended up with the insurance part of Santander.

What does it mean:
-Spain's government is good at arm twisting its banks.
-Bank are further ruining their BSs with one sided very risky overpriced stuff.
-Also the big banks are now in (not only the Cajas which were nearly bust anyway). So now the whole sector is overloaded with junk and completely onesided/monolithical as well.
-how it combines with the bankrescue well nobody can give an proper explanation for it as there is none.

The only positive is that PIMCO/Allianz is buying stuff as well, allthough could be to support the price of their earlier purchases as they are in pretty deep (basically running a lot of risk for relatively low yields which is not too clever).

christina speight said...

Rik is baffled - I am almost speechless!

In the real world where people live and would like jobs and something to eat, things go from bad to worse. The banks are bust, their balance sheets are a sick joke , the provinces are all in trouble and even the planned future is of (planned) disaster.

Truly Spain is the proverbial 'Riddle wrapped in an enigma'. Somebody there must be cooking the books.

Rik said...

To be honest I have no patience at all (absolutely zero).

Problem is that media are simply copying the pressreleases of Spain that has a huge conflict of interest, to present facts in a certain way. And everything points in the way that they actually do that. But 8-9 out of 10 media present time and time again the same hogwash.
In reality the situation is very close to how I describe it. So extremely worrying. It is simply moving the hot patato from government to the banks and back.
The real news is that the hogwash has become institutionalised and that now also relatively healthy banks like Santander are joining. Making the bankingsector not only toxic as it already was, but radioactiv as well. A medium sane person will not longer hold money in any Spanish bank. The fully sane have already left the building a few years ago.
The only thing we read/hear however is a successful auction.