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 to protect delicate sensibilities)
Show all comments ↓

Comments (56)

  1. Posted by Guest | August 11, 2011 at 1:25 PM

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

  2. Posted by Shawn | August 11, 2011 at 1:34 PM

    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.

  3. Posted by geoffgeoffgeoff | August 11, 2011 at 1:36 PM

    You forgot to sign, "Deductive Reasoning Quant."

  4. Posted by guest | August 11, 2011 at 1:43 PM

    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

  5. Posted by minus 1 | August 11, 2011 at 1:46 PM

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

  6. Posted by Guest | August 11, 2011 at 1:47 PM

    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

  7. Posted by Sylent | August 11, 2011 at 1:50 PM

    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

  8. Posted by deal_mkr | August 11, 2011 at 1:54 PM

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

  9. Posted by trojan_ | August 11, 2011 at 2:02 PM

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

  10. Posted by Name | August 11, 2011 at 2:27 PM

    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.

  11. Posted by Guest | August 11, 2011 at 2:30 PM

    You don't real ZH much do you.

  12. Posted by Bandersnatch | August 11, 2011 at 2:57 PM

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

  13. Posted by Guest | August 11, 2011 at 3:45 PM

    I knew it was a Matt post even before I read the title

    -Gartman Quant

  14. Posted by PermaGuestII | August 11, 2011 at 4:04 PM

    There aren't enough random digressions on astrophysics and/or the doctrines of Ayn Rand.

  15. Posted by Guest | August 11, 2011 at 4:34 PM

    Or Black Swan-esque scenes about how badly she wanted to work for a GP

  16. Posted by Guest | August 11, 2011 at 4:35 PM

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

  17. Posted by NowOnePerson | August 12, 2011 at 10:12 AM

    As soon as I finished reading the post in less than 5 minutes, I thought it had been mistakenly labelled a Matt post…

  18. Posted by Bristol Airport Hotels | April 19, 2012 at 11:27 PM

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

  19. Posted by chaga | April 24, 2012 at 3:45 PM

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

  20. Posted by Knoxville Carpet Cleaners | April 25, 2012 at 12:49 PM

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

  21. Posted by buy oem software | May 1, 2012 at 3:34 PM

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

  22. Posted by EDU Backlink | May 3, 2012 at 11:37 AM

    Enjoyed every bit of your article. Much obliged.

  23. Posted by Met | May 3, 2012 at 1:35 PM

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

  24. Posted by cheap travel destination | May 3, 2012 at 1:37 PM

    Fantastic blog. Really Great.

  25. Posted by Social marketing | May 3, 2012 at 3:44 PM

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

  26. Posted by online auction | May 3, 2012 at 5:45 PM

    Fantastic article. Keep writing.

  27. Posted by forex robot review | May 3, 2012 at 6:44 PM

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

  28. Posted by personal loans | May 3, 2012 at 7:44 PM

    Great article post.Really thank you! Fantastic.

  29. Posted by Truth In Gold | May 3, 2012 at 7:53 PM

    Really informative blog.Much thanks again. Awesome.

  30. Posted by Feedback Generator | May 3, 2012 at 10:06 PM

    I truly appreciate this article post.

  31. Posted by what is usability testing | May 4, 2012 at 12:19 AM

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

  32. Posted by payday loans | May 4, 2012 at 1:27 AM

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

  33. Posted by szex kontakt | May 4, 2012 at 10:25 AM

    Hey, thanks for the blog. Really Great.

  34. Posted by unlock iphone by imei | May 4, 2012 at 11:35 AM

    Thanks for the blog.Thanks Again. Much obliged.

  35. Posted by gold ira investing | May 5, 2012 at 9:28 AM

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

  36. Posted by alcoholic behavior patterns | May 5, 2012 at 11:56 AM

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

  37. Posted by alcohol addiction help | May 5, 2012 at 1:10 PM

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

  38. Posted by love advice | May 7, 2012 at 8:17 AM

    Major thanks for the blog article. Fantastic.

  39. Posted by Kizzy Eytcheson | May 7, 2012 at 2:58 PM

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

  40. Posted by weight loss centers | May 7, 2012 at 6:23 PM

    Really enjoyed this article.Much thanks again. Cool.

  41. Posted by Porno | May 7, 2012 at 7:51 PM

    Great article post.Really thank you! Awesome.

  42. Posted by webhostingtalk review | May 7, 2012 at 8:49 PM

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

  43. Posted by cannabis growing | May 8, 2012 at 12:59 AM

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

  44. Posted by get more facebook likes | May 8, 2012 at 3:18 AM

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

  45. Posted by iphone 4s unlocked | May 8, 2012 at 5:49 AM

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

  46. Posted by seitensprung esx | May 8, 2012 at 7:19 AM

    Awesome article.Much thanks again. Cool.

  47. Posted by vista | May 8, 2012 at 9:37 PM

    Thank you for your article. Awesome.

  48. Posted by http://vicodin-addictions.com | May 8, 2012 at 11:50 PM

    Appreciate you sharing, great blog. Awesome.

  49. Posted by pro arginine plus | May 9, 2012 at 5:23 AM

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

  50. Posted by iron | May 9, 2012 at 6:51 PM

    This is one awesome blog.Much thanks again.

  51. Posted by Titleist AP1 712 Irons | May 9, 2012 at 11:39 PM

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

  52. Posted by Hot Yoga, Surrey, BC | May 10, 2012 at 6:12 AM

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

  53. Posted by tabla | May 10, 2012 at 6:19 AM

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

  54. Posted by www.NeedRapidCash.com,NeedRapidCash.com | May 10, 2012 at 9:35 AM

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

  55. Posted by cash | May 10, 2012 at 10:21 AM

    Major thankies for the blog. Much obliged.

  56. Posted by provillus reviews | October 12, 2012 at 9:56 PM

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