European sovereign-debt crisis escalated
September 28th, 2010
“Sept. 28 (Bloomberg) — Irish and Portuguese bonds slid, sending yields on the debt to records relative to German bunds, on concern the cost of bailing out the region’s banks is rising. Stocks and U.S. futures fell and the euro weakened.
The extra yield, or spread, investors demand to hold Ireland’s 10-year securities instead of similar-maturity benchmark German debt widened 22 basis points to 452 basis points as of 9:37 a.m. in London. The Portuguese-German spread increased 24 basis points to 439 basis points. The Stoxx Europe 600 Index lost 0.9 percent to a three-week low, while futures on the Standard & Poor’s 500 Index declined 0.4 percent. The euro weakened against 12 of its 16 most-traded counterparts. Oil and copper dropped and cotton extended gains to a 15-year high.
The cost of insuring Irish sovereign debt against default rose to a record, more than doubling in the past two months, as Standard & Poor’s said the bailout for Anglo Irish Bank Corp. may exceed its earlier forecast of 35 billion euros ($47 billion). Spreads on bonds of so-called euro-area peripheral nations have widened even after the European Union and International Monetary Fund put in place a $1 trillion financial backstop for the region’s most indebted nations.” (Since the story has changed, here is a link to the above story)
……………….1A) Ireland Leads Surge in Sovereign Default Swaps on Bank System Bailout Cost
………………..1B) S&P warns of further possible Irish downgrade
…………………1C) Anglo Irish Cost May Exceed 35 Billion Euros, S&P Says
…………………..1D) Spain Borrowing Costs Rise as Moody’s Decision Looms
……………………..1E) Spain presents draconian budget with unemployment remaining above 19%
………………………..1F) Berlusconi Sees Italian Yields Rise on Threat of Early Election
* 2) ‘China cannot carry world’s growth’
“Saville said a number of countries lacked the ability to pay their way because they had ratios of public debt to GDP that were above the accepted level of 60 percent of GDP and budget deficits that exceeded the 3 percent of GDP benchmark. They include not only Greece, Spain, Portugal, Ireland and Italy but also the UK, the US and Japan.
He quoted Bill Gross, who runs the world’s biggest bond fund, Pimco, as saying UK government bonds “are resting on a bed of nitroglycerine”.
In the US, according to Saville, total credit market debt is equal to 360 percent of GDP, compared with 260 percent in the Great Depression. “And the federal government adds $4 billion each day.”
The question for the US, he said, was “not whether to default but how”. The debt would probably be “inflated away”.”
* 3) Dollar Is `One Step Nearer’ to Crisis on Burgeoning Debt Burden, Yu Says
“The U.S. dollar is “one step nearer” to a crisis as debt levels in the world’s largest economy increase, said Yu Yongding, a former adviser to China’s central bank.
Any appreciation of the dollar is “really temporary” and a devaluation of the currency is inevitable as U.S. debt rises, Yu said in a speech in Singapore today.
“Such a huge amount of debt is terrible,” Yu said. “The situation will be worsening day by day. I think we are one step nearer to a U.S.-dollar crisis.”
Yu also said China is worried about the safety of its foreign-exchange reserves including those invested in U.S. Treasuries as the U.S. currency weakens, reiterating his earlier views on the dollar assets. The U.S. will record a $1.3 trillion budget deficit for the fiscal year ending Sept. 30, the Congressional Budget Office said Aug. 19.
The estimated budget deficit for this fiscal year would be equivalent to 9.1 percent of gross domestic product, the CBO said. That would make it the second-largest shortfall in 65 years, exceeded only by the 9.9 percent in 2009.
The CBO also projected the U.S. would have a cumulative deficit of $6.27 trillion in the next decade, higher than its March estimate of $5.99 trillion. ”
September 28th, 2010
“Sept. 28 (Bloomberg) — Irish and Portuguese bonds slid, sending yields on the debt to records relative to German bunds, on concern the cost of bailing out the region’s banks is rising. Stocks and U.S. futures fell and the euro weakened.
The extra yield, or spread, investors demand to hold Ireland’s 10-year securities instead of similar-maturity benchmark German debt widened 22 basis points to 452 basis points as of 9:37 a.m. in London. The Portuguese-German spread increased 24 basis points to 439 basis points. The Stoxx Europe 600 Index lost 0.9 percent to a three-week low, while futures on the Standard & Poor’s 500 Index declined 0.4 percent. The euro weakened against 12 of its 16 most-traded counterparts. Oil and copper dropped and cotton extended gains to a 15-year high.
The cost of insuring Irish sovereign debt against default rose to a record, more than doubling in the past two months, as Standard & Poor’s said the bailout for Anglo Irish Bank Corp. may exceed its earlier forecast of 35 billion euros ($47 billion). Spreads on bonds of so-called euro-area peripheral nations have widened even after the European Union and International Monetary Fund put in place a $1 trillion financial backstop for the region’s most indebted nations.” (Since the story has changed, here is a link to the above story)
……………….1A) Ireland Leads Surge in Sovereign Default Swaps on Bank System Bailout Cost
………………..1B) S&P warns of further possible Irish downgrade
…………………1C) Anglo Irish Cost May Exceed 35 Billion Euros, S&P Says
…………………..1D) Spain Borrowing Costs Rise as Moody’s Decision Looms
……………………..1E) Spain presents draconian budget with unemployment remaining above 19%
………………………..1F) Berlusconi Sees Italian Yields Rise on Threat of Early Election
* 2) ‘China cannot carry world’s growth’
“Saville said a number of countries lacked the ability to pay their way because they had ratios of public debt to GDP that were above the accepted level of 60 percent of GDP and budget deficits that exceeded the 3 percent of GDP benchmark. They include not only Greece, Spain, Portugal, Ireland and Italy but also the UK, the US and Japan.
He quoted Bill Gross, who runs the world’s biggest bond fund, Pimco, as saying UK government bonds “are resting on a bed of nitroglycerine”.
In the US, according to Saville, total credit market debt is equal to 360 percent of GDP, compared with 260 percent in the Great Depression. “And the federal government adds $4 billion each day.”
The question for the US, he said, was “not whether to default but how”. The debt would probably be “inflated away”.”
* 3) Dollar Is `One Step Nearer’ to Crisis on Burgeoning Debt Burden, Yu Says
“The U.S. dollar is “one step nearer” to a crisis as debt levels in the world’s largest economy increase, said Yu Yongding, a former adviser to China’s central bank.
Any appreciation of the dollar is “really temporary” and a devaluation of the currency is inevitable as U.S. debt rises, Yu said in a speech in Singapore today.
“Such a huge amount of debt is terrible,” Yu said. “The situation will be worsening day by day. I think we are one step nearer to a U.S.-dollar crisis.”
Yu also said China is worried about the safety of its foreign-exchange reserves including those invested in U.S. Treasuries as the U.S. currency weakens, reiterating his earlier views on the dollar assets. The U.S. will record a $1.3 trillion budget deficit for the fiscal year ending Sept. 30, the Congressional Budget Office said Aug. 19.
The estimated budget deficit for this fiscal year would be equivalent to 9.1 percent of gross domestic product, the CBO said. That would make it the second-largest shortfall in 65 years, exceeded only by the 9.9 percent in 2009.
The CBO also projected the U.S. would have a cumulative deficit of $6.27 trillion in the next decade, higher than its March estimate of $5.99 trillion. ”