The Thaw Begins (perhaps)

It's been since at least mid-May that Spanish financial institutions were said to be locked out of the wholesale credit markets. This situation has begun to change. Various news sources (here's one) are reporting that BBVA has placed 2 billion euros - double the amount initially targetted - of covered bonds with a three year maturity. Buyers were apparently from...

Germany - 25%
France - 15%
Great Britain - 12%
Asia - 18%
Switzerland - 8%

...leaving 22% for Spanish and 'others'.

As an aside, the Expansión article linked to above makes the negative assertion that the 195 bps over mid-swaps represented a 'doubling' of the yield with respect a La Caixa 6-year issue of three months ago. We're willing to stand corrected, but it seems that the writer of the piece misses the point on a number of counts. First, this is not a 100% increase in yield. Without knowing the reference figure, there is nothing to surmise concerning the interest rate to be paid. Second, today's issue consisted of cédulas hipotecarias - covered mortgage bonds - whilst the other was of cédulas territoriales - packaged loans to government administrations. This is a different and presumably less risky product (though some very vocal wags might claim otherwise). Third, one of the characteristics of the eurozone credit chaos of the last several months was that swap and benchmark spreads at the short end widened more than at the long. But the yield curve did not, to our knowledge, ever become inverted.

It would be nice if, one day, 'they' would start reporting actual yields alongside the calculation of the difference between two moving targets.

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