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Europe disregards ratings, liquidity | Insight Europe

Now that bill auctions are an attention grabbing headline..

Europe woke to an afternoon of auctions with EFSF getting a lot of business from 6 month bills, even as ECB deposits crossed $500 bln

The British 2-10 spread fell to 158 bp even as the currency fell against the Euro and to a 26 year low against the Aussie nodding to the fall in inflation on the English islands.

Spanish auction yields fell from 3.24% to 2% tonight, a far cry from the 4% in November and Western Europe is even ready to use EU and IMF aid for Eastern europe markets esp supporting Italian Banks like Unicredito, German Erst and Raiffesen underestimating the crunch on bank balance sheets that are still not lending monies and keeping them all with the ECB, borrwing against it a t a 1.5% higher rate in emergency windows. France managed a 1 year auction yesterday at the same 0.41%

And the US is chugging along comfortably

US Economy in the mean time jumped on the Empire State Survey ( New York area) to a surprising 13.5, giving a run of good economic news to follow from the Philly Fed numbers, and following on the ISM numbers despite the not so interesting payroll negative surprise.

How much do ratings matter..

Mario Draghi himself stepped into the ring to defend his 1% interest rate floor he maintained last week, questioning the applicability of

International Monetary Fund's Managing Directo...

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ratings agencies’ interventions

“I will never comment on ratings as such, but certainly one needs to ask how important are these ratings for the marketplace overall, for investors?” Draghi said late yesterday at the European Parliament in Strasbourg. “It seems to a great extent markets have anticipated these ratings changes and priced them in. We should learn to do without ratings, or at least we should learn to assess creditworthiness” with less reliance on the ratings companies, he said.

French bond spreads to the bund remained at 1.33% on the 10 year note even as German yields caught up to safe haven status again at 0.13% on Friday among the couple of demand led corrections that are inevitable in the market scheme.

(Hat Tip UBS in the mean time also pointed to more impact from the ratings announcements to thepolitics of the


consolidated Euro economy, as the weekend saga gave more weight to Germany in the mix and dealt a serious blow in Capital losses to AAA only funds relying on French investments that remain priced at AA+ levels and likely lower as they still carry a negative outlook

Italy also seemd to follow its junk rating with seriousness, yields showing signs of never recovering despite three board members in the ECB schema and Mario Monti from Goldman Sachs as Prime Minister, governments following fortunes of the banks again inthis case after the French followed their banks into the debt bind


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This entry was posted on January 17, 2012 by in Amitonomics, Banking, European Sovereign Debt crisis and tagged , , , , , , , .


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