When last we checked in with Javier Martin-Artajo, his attorney was telling the press that he was on vacation and had no plans or reason to believe it was necessary to cut said vacation short. Now this is happening: Read more »
No human can realistically be expected to understand or focus on the constant stream of Eurozone gyrations and in fact humans increasingly don’t, with the half-life of blather-driven euphoria declining rapidly. The latest gyration seems to be that Germany is contemplating letting the Eurozone collective rescue funds think about maybe one day putting up for discussion the possibility of considering buying bonds of distressed countries directly to try to drive down funding costs for those countries.
This seems to have helped Spanish yields more than did the announcement earlier this month that those funds might consider giving Spain €100bn in special senior debt to get its banks sorted, for sort of obvious reasons. If the EFSFSMCBFFFFF is buying hundreds of billions worth of Spanish bonds right alongside whatever brave dopes are buying them already, that buying pressure should push up prices and push down Spanish borrowing costs and improve Spanish sustainability in a virtuous circle etc. etc. If the EFSFSMCBFFFFF is instead putting in its money at a more senior level than those bondholders, then those bondholders are subordinated and, empirically, sad about it.
One weird thing though is that there is little assurance that “EFSFSMCBFFFFF buying the same bonds that everyone else is buying” is actually the same thing as “EFSFSMCBFFFFF ending up with the same bonds that everyone else is buying.” The (not yet ratified!) ESM treaty maybe requires the ESM to be senior to market creditors (maybe!), but also maybe allows it to buy market bonds, which generally are not senior to themselves. Seniority is ordinarily a matter of contract: if you buy one of a series of totally fungible publicly traded bonds, you generally expect to be treated pari passu with the rest of those publicly traded bonds.
Ordinarily! Read more »
How do you like us now?
Spain, as you may have heard, does not have a lot going for it at the moment. Its bond yields have crossed 7 percent, unemployment is at something like 70 percent, and on Monday, it announced a rather poorly received bailout of the country’s banks. Investors don’t want to touch their financial institutions with a 100 foot pole. One bank that knows the rejection all too well? Banco Santander, probably on account of the open sores and the fact that it’s a regular down at the free clinic. Today, though, that’s about to change. Everyone’s gonna want a piece of this. Read more »