Kamis, 29 Maret 2012

Spain in focus but the weakness in credits reflects all of the PIIGS...


Fighting With Spanish Windmills, Or How Spain's Debt/GDP Ratio Is Double What Is Reported

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From Mark Grant author of 'Out of the Box and Onto Wall Street'
Fighting With Spanish Windmills
When I first attempted to find a more realistic debt to GDP ratio for Spain, Belgium, Italy et al I did it on a stand-alone basis; no inclusion of their European liabilities. When I approached Germany, given their size and importance in the EU, I focused upon their liabilities to the European Union. Several institutions have since asked me to consider the total liabilities for each country as every nation in the European Union has national debts as well as debts for their percentage of ownership for the EU and the European Central Bank. Using the combination of national liabilities and any nation’s percentage of EU/ECB liabilities one then could ascertain a final and complete picture of a real debt to GDP number that, unlike the Eurostat data, would be inclusive of sovereign guarantees, contingent liabilities and their responsibilities to the EU and the ECB. This schematic then would tell each of us what a given country actually owed so the total reality could be assessed for judgment.  Given that Spain is currently in focus and that nowhere that I have ever seen has there been an accurate national debt coupled with Spain’s European debt schematic; I have decided to provide you one.
“What I said about the economic side of the Inquisition supplies an explanation which will occur at once to the reader. It was a question of the division of the spoils. Sixtus IV and his successors greatly disliked the Spanish Inquisition because all the confiscated wealth remained in Spain. The Popes raised a little by receiving at Rome appeals -- those humane and beneficent appeals -- from the sentences of the Spanish Inquisitors, and remitting penances for a money-payment. But the Spaniards retorted by refusing to recognize the Pope's dispensations, and there was an unholy struggle.”
                                          -Joseph McCabe, The Story of Religious Controversy
The Data
Spain’s GDP                                                $1.295 trillion
Admitted Sovereign Debt                                 $732 billion
Admitted Regional Debt                                   $183 billion
Admitted Bank Guaranteed Debt                     $103 billion
Admitted Other Sovereign Gtd. Debt               $ 72 billion
Total National Debt                                         $1.090 trillion
Spain’s Liabilities at the ECB                           $332 billion
Spain’s Cost for the EU budget                       $ 20 billion
Spain’s Liabilities for the Stabilization Funds   $125 billion
Spain’s Liabilities for the Macro Fin. Ass. Fund $ 99 billion
Spain’s Guarantee of the EIB debt                  $ 67 billion
Spain’s Total European Debt                           $643 billion
Spain’s National and European Debt                $1.733 trillion
Spain’s OFFICAL debt to GDP Ratio                     68.5%
Spain’s ACTUAL Debt to GDP Ratio                  133.8%
“Yes, they have tricks up their sleeves and multiple methods of presentation and by multiple people. Yes, they give us an illusion with the appearance of truth but we are better than that and far smarter than they have calculated. I give you truth without illusion and regardless of their contentions; we can differentiate between reality and the fantasy that they weave for their own dark purposes.”
                                                                -The Wizard



European Stress Getting Progressively Worse As LTRO Boost A Distant Memory

Tyler Durden's picture

The sad reality of an austerity induced slowdown in Europe and an ESFS/ESM as useful as a chocolate fire-guard seems to be creeping into risk asset premia across Europe (and implicitly the US). GGB2s are all trading back under EUR20 (that is 20% of par), Sovereign yields and spreads are leaking wider despite the best efforts of their respective banks to back-up-the-truck in the 'ultimate all-in trade' and the LTRO Stigma has reached record levels as LTRO-encumbered banks' credit spreads are the worst in over two months.Spanish sovereign spreads are back at early January levels and with Italian yields comfortably back over 5% and the bonds starting to reality-check back towards the much less sanguine CDS market. It seems apparent that much of the liquidity-fixing LTRO benefits are now being washed away as investors realize nothing has changed and in fact things are considerably worse now given encumbrance and subordination concerns and the increased contagion risk that the LTRO and the Sarkozy trade has created.
The LTRO Stigma is as high as it has ever been. LTRO-encumbered bank credit spreads are back to early January levels (while non-LTRO banks remain much more sanguine - less subordinated)...
GGB2s are all trading under 20% of par as the simple reality that nothing was fixed hits home...

And as pivot securities in Italy (broken 5% yields and bonds catching up to CDS)...
And Spain even worse as its sovereign risk premia (lower pane) reaches back to early January levels (and notably at the top of its 3 month channel)...
And this week has been ugly in general for European sovereigns - most especially the Italian and Spanish yields (which if they are in trouble the EFSFESM firewall simply cannot cope with), it seems the market is starting to test the political will in the Euro-area once again...
and while Portugal is better on the week quote notably - it is mostly related to the basis trade compression we talked about yesterday so do not read too much into it.

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