Italy

[rffrydr]

Wage growth 2.7 YOY vs core rate 2.2 YoY: that's the kind of inflation central bankers cannot live with.

[HenryTo]

Two-notch rating cut not a surprise. Market bleeding should stop here.

http://www.bloomberg.com/news/2012-01-13/italy-s-credit-rating-is-reduced-two-levels-to-bbb-by-s-p-official-says.html

[rffrydr]

Italy's "shadow banking" system:

http://www.reuters.com/article/2012/01/10/italy-mafia-idUSL6E8CA5Y520120110

Interesting to note the impulse to borrow mentioned here: overaged shopkeeper with no alternative employment. Can this trend really be italian specific?
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Well it took a few days, but we're down near the rights price....institutional money moves a little slower I suppose. "Unidebit" preferreds getting interesting.

https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0B2Ga-HXaeeMuMWM3NGIyZmYtMjkzOS00ZTY3LTkzNTItNjYyOTEwZDFjZTIx&hl=en_US
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Unicredit, despite all the negative headlines on biggest discount in european bank refis (43% with option value; 60% without), and despite trading down double-digits is nowhere close to that rights value.

I like Monti and see this as a good start. We need some assets sales and something started on labor (Fiat is showing the way (escape) depending on how you look at it).
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Italy and Spain comes back into focus next week. I expect the refunding efforts to go smoothly; and thus a non-event.
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* Bunds slip; consolidate December rally, German auction eyed

* Lingering debt crisis to limit fall in safe-haven demand

* Next week's Italian, Spanish supply seen as flashpoint

By William James

LONDON, Jan 3 (Reuters) - German Bund futures slipped on Tuesday as December's sharp rally faded, but the euro zone's crippling debt crisis was expected to limit falls as refinancing pressure grows on the bloc's lower-rated sovereigns.

The drop added to losses in the previous session, but underlying demand for the relative safety and liquidity of German debt was set to remain supportive as the region's debt problems continue to fuel low-risk investment strategies.

Bund futures were 16 ticks lower at 138.03 after rallying more than 5 points in December to within sight of November's record high of 139.58.

"The consolidation in Bunds following the turn of the year could still run another day," Commerzbank strategists said in a note, but added that any falls were likely to be short-lived.

"Next week - at the latest - the focus should shift to the debt problems of the euro zone periphery again with the Italian and Spanish bond auctions scheduled."

Italy's borrowing costs, hovering near the 7 percent level, are a crucial gauge of sentiment with the country needing to refinance more than 100 billion euros of maturing bonds and interest payments in the first quarter of the year.

Italian 10-year bonds last yielded 6.90 percent, slightly lower on the day.

Markets will be watching to see if banks use a huge 489 billion euro injection of three-year loans from the European Central Bank to buy Italian and other lower-rated debt, or continue to deposit the cash at the ECB and pay their own debts.

SUPPLY PRESSURE

Germany and France will sell 2012's first bonds this week, with market participants pointing to the 13 billion euros of supply as another factor weighing on top-rated debt.

Ahead of the supply, the French/German 10-year yield spread widened 6 basis points to 140 bps, its widest since Dec. 8.

The real supply crunch begins next week with Spain and Italy - the two countries at the forefront of concerns about the region's ability to escape its debt problems - both due to issue bonds.

Spanish debt has outperformed Italian paper on the perception that it poses less of a systemic risk to the currency bloc, and has less demanding refinancing needs in 2012. But, after unveiling a larger than expected budget deficit and a grim outlook, that outperformance could be reversed.

"You could argue that Spain's done too well, with talk of a deficit above 8 percent of GDP. We're looking to be short Spain from here," a trader said.

Ten-year Spanish bonds carried a yield 174 bps lower than their Italian equivalent, just off levels seen last week of nearly 200 basis points -- the biggest yield gap between the two countries' bonds since the launch of the euro.

Spanish 10-year yields were 2.6 bps higher on the day at 5.16 percent.

[HenryTo]

Italy expects to raise two billion Euros from the sale of certain TV frequencies.

http://www.bloomberg.com/news/2011-12-20/italy-seeks-to-raise-cash-from-tv-frequencies-amid-debt-crisis.html

[HenryTo]

Italy sells 7 billion Euros in one-year bills. Borrowing costs remain highly elevated with one-year rates just 13 bps off a 14-year high.

http://www.bloomberg.com/news/2011-12-12/italian-one-year-borrowing-cost-declines-to-5-952-after-agreement-on-euro.html

[rffrydr]

By the looks of the Labor parliamentarian writ large on the cover today's WSJ, it's for real this time.


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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

....."financial cascade." Economist way ahead with its "flaming-comet euro."

Italy's "problem" is labor: starting with the perked-out parliament and working down through "first-tier" union, established in 1947 Constitution. 2700 pages of labor law where ANY firing can be challenged and reinstated arbitrarily. And reflecting this 90% plus business fewer than 10 employees. BUT, Fiat just closed plant in Sicily and Chrysler pickup may be guiding light.

Here is a wealthy developed country with a primary surplus NOW reforming. Beware, good new can "cascade" too.
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Stratfor on Italy.

[rffrydr]

RTRS-ITALY SAYS AUCTIONS TO NORMALLY OFFER OVERNIGHT MATURITIES WITH CREDIT LIMITS, WILL HOLD MORNING AND SOMETIMES AFTERNOON AUCTIONS
09:13 30Nov11 RTRS-ITALY TRSY SAYS NEW SYSTEM OF LIQUIDITY MANAGEMENT THROUGH AUCTIONS STARTS TODAY
NH
RTRS-ITALY TREASURY SAYS TO LAUNCH AUCTIONS TO LEND OR BORROW “SIGNIFICANT AMOUNTS” OF CASH ON MONEY MARKET USING TRSY’S ACCOUNT AT BANK OF ITALY

Treasury will backstop banks itself if it has to.

Not since the Medicis met the Pope--eventually becoming the Pope-- has it been more clear that the State and the Company are two entirely different species when it comes to debt.

Taking the original Dow 30 stocks and, at the same time, the top 30 American cities who stands now? It's not even close.
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Getting IMF aid would be the nail in the coffin, unless IMF disowns seniority over existing Italian debt holders.

http://www.bloomberg.com/news/2011-11-27/imf-readying-600-billion-euro-loan-offer-for-italy-stampa-says.html

[rffrydr]

Italy is a wealthy country....really, with a primary surplus, this is a question of will:






At the end of 2009 the gross wealth of Italian households was estimated at
€9,448 billion and their net wealth at €8,600 billion, corresponding to about
€350,000 per household. Real assets accounted for 62.3 per cent of gross
wealth and financial assets for 37.7 per cent. Financial liabilities, which
amounted to €860 billion, were equal to 9.1 per cent of total assets.

Recent studies estimate global net household wealth at €160,000 billion.16 Italy’s share
would thus come to 5.7 per cent, which is particularly high by comparison with the country’s
share of world GDP (3 per cent) and population (1 per cent). Italy is one of the richest of the
200 countries considered, ranking tenth in per capita net wealth. Some 60 per cent of Italian
households hold more net wealth than 90 per cent of all the world’s households. Nearly all
Italian households have more net wealth than 60 per cent of all the world’s households.

--Bank d'Italia
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Still no panic as Italian 10-years hit 7%; while the French OATS spread hits Euro era highs of 188 bps:

http://www.bloomberg.com/news/2011-11-15/german-two-year-notes-fall-after-report-shows-economic-growth-quickened.html

[rffrydr]

They attacked Italy because of Italy. The opera buffa was just too easy a target. The irony of Burlesconi coming in as the "business man" is just too painful to laugh though. They had a nice big auction to sell into (which italy in a nice twist went ahead with and showed they can command buyers) and some nice plants in the press. The bigger picture however is that Europe has just displaced two democratic governments, replacing them with their own. Things can now get started. As Merkel says, "more europe." What is remarkable is how quickly this was achieved. One big spasm in the Dow was inevitable if for no other reason is it had to do something.

China hint was a big fail--esp when they already had pre-committals for 10 from Russia, 10 from Brazil and? But Wen said, "not quite there yet." So it will come.

CDS strike was brilliant. No reverberations back to the banks who underwrote. No-one believed in their "clearing capacity" anyway at this point. Just another reason Sovereign CDS is an oxymoron. Infinite liquidity across long tails is a myth propagated during our Gilded-Age.

A plan without details is exactly the plan. The details will always be discredited in the vicious cycle with the proverbial "...but still." The exercise of power...that is what will be decisive. Unfortunately that word is not in the EU vocabulary. If I had my druthers they should have reinstated DSK in some capacity. A man with nothing to loose,or, rather, nothing left to fear--that's what Europe needed. Indeed a man by itself would be nice at this point
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Today is the Tomorrow you worried about Yesterday!