News

Are European Regulators Just Going To Ban Everything And Take The Summer Off?

So Europe’s going to ban short selling. Or not, whatever. Or, sure, yes. Since last time this happened it did such a great job of propping up equity prices.

But maybe propping up equity prices isn’t the point? It’s not hard to find European (or American) politicians who just think that short selling is immoral and should be punished by public flogging, whatever it does to equity prices. And given the likely explanation for the recent European financials selloff – worries that banks’ balance sheets are stuffed with Italian government debt – maybe there’s something else going on here. Here’s a comment that’s sure to get some regulators’ blood boiling:

“People are shorting banks as a way of shorting sovereign debt,” Tom Vosa, head of markets economics, Europe at National Australia Bank, told CNBC Thursday. “What we are really seeing is the markets deciding they don’t like the fiscal position in Europe.”

As FT Alphaville points out today, CDS spreads on European sovereigns are widening even as bond yields are rallying – because of technical factors that can be summed up as “regulatory interference.” (ECB is buying the bonds and pushing yields down, while the CDS market is thinly traded given speculation about bans and such.) If you want to bet on European government credit declines, it’s becoming increasingly difficult to either short bonds or buy CDS – so you’re left shorting the stock of the banks that own the most of it.

Of course banning short sales of banks probably wouldn’t do much to prop up Italy – but it would make it more painful to express a negative view on Italian debt. Which seems to be what European regulators are after.

56 comments
(hidden for your protection)
Show all comments

56 Responses to “Are European Regulators Just Going To Ban Everything And Take The Summer Off?”

  1. Guest says:

    As soon as I read the title I knew it was going to be a Matt post…

  2. Shawn says:

    They were supposed to have some dude from France on CNBC this morning talking about SocGen, but the anchor said the regulator banned him from talking.

    • Guest says:

      They were supposed to have some "short" dude from France on CNBC this morning talking about SocGen, but the anchor said the regulator banned him from talking. OIHNPWT

  3. guest says:

    I think it is a good idea. That way the politician can have some vacation time. Why should Obama be the only one to have fun at Martha Vineyard

    • Sylent says:

      Why should he stick around when he can't vote nothing into law, when Congress took off since last week. Just saying…

      — Guy who's sick of blaming Obama for my mom's farts

      • Name says:

        I wanted to comment on the intrinsic difficulty of voting nothing into law, but paused for a moment in deference to your tacit jab at domestic legislative incompetence in general.

  4. minus 1 says:

    I like how Matt got people to read both of his articles today "of propping up equity prices." Smooth move Matt, smooth.

  5. deal_mkr says:

    if i wanted to read zerohedge i would go to zerohedge….

  6. trojan_ says:

    "Markets instead prefer the reverse cowgirl position in Southeast Asia," Vosa continued.

  7. Bandersnatch says:

    Matt:
    Are you channeling Equity Private? And in particular, the Equity Private that had stopped trying to be clever and funny.

  8. Guest says:

    Matt, it's Europe. Everyone takes off the whole summer anyway.

  9. dIPqoK Great, thanks for sharing this post. Want more.

  10. chaga says:

    Thank you for your article post.Much thanks again. Much obliged.

  11. I really enjoy the blog article.Really looking forward to read more. Awesome.

  12. vqTmW2 I loved your article.Much thanks again. Awesome.

  13. EDU Backlink says:

    Enjoyed every bit of your article. Much obliged.

  14. Met says:

    Thanks for sharing, this is a fantastic post.Thanks Again. Fantastic.

  15. Fantastic blog. Really Great.

  16. Wow, great post.Really thank you! Much obliged.

  17. Fantastic article. Keep writing.

  18. Im grateful for the article.Thanks Again. Really Cool.

  19. Great article post.Really thank you! Fantastic.

  20. Really informative blog.Much thanks again. Awesome.

  21. I truly appreciate this article post.

  22. Thanks for the blog article.Really looking forward to read more. Much obliged.

  23. payday loans says:

    I really like and appreciate your post.Much thanks again. Much obliged.

  24. szex kontakt says:

    Hey, thanks for the blog. Really Great.

  25. Thanks for the blog.Thanks Again. Much obliged.

  26. Im grateful for the article post.Really thank you! Cool.

  27. Looking forward to reading more. Great article post.Thanks Again. Keep writing.

  28. I really like and appreciate your blog article.Much thanks again. Want more.

  29. love advice says:

    Major thanks for the blog article. Fantastic.

  30. I really liked your blog.Really looking forward to read more. Fantastic.

  31. Really enjoyed this article.Much thanks again. Cool.

  32. Porno says:

    Great article post.Really thank you! Awesome.

  33. Really informative article post.Really looking forward to read more. Really Cool.

  34. Im obliged for the blog.Much thanks again. Fantastic.

  35. I really like and appreciate your blog article.Really thank you! Cool.

  36. Say, you got a nice article.Much thanks again. Will read on…

  37. Awesome article.Much thanks again. Cool.

  38. vista says:

    Thank you for your article. Awesome.

  39. Appreciate you sharing, great blog. Awesome.

  40. I appreciate you sharing this blog post.Really thank you! Want more.

  41. iron says:

    This is one awesome blog.Much thanks again.

  42. I cannot thank you enough for the post.Much thanks again. Fantastic.

  43. I truly appreciate this blog article.Thanks Again. Great.

  44. tabla says:

    Major thankies for the article post.Really looking forward to read more. Will read on…

  45. Thank you for your blog article.Really thank you! Fantastic.

  46. cash says:

    Major thankies for the blog. Much obliged.

  47. Get a Plunger You’ll find presently two international locations and also to look bare, a reference within the Narada Pancaratra Text nine