The Big Bailout of the Eurozone (Another crisis coming? - Seriously)

[trileacman]

That information does not exist Whiskeysteve, Brian Lenihan said so on 18-05-2010

"Detailed information on bondholders of domestic credit institutions' senior and subordinated debt is not available. Credit institutions, including Anglo Irish Bank, do not have access to comprehensive information on the holders of their senior and junior, or subordinated debt, because such debt is publicly traded and dealt through clearing house systems. Issuers do not have access to the records of those systems and the issuer has no means of establishing the underlying ownership of its bonds at any given time. Unlike in the case of shares, the holders of credit institutions' senior and subordinated debt instruments are not subject to a disclosure regime."

http://www.kildarestreet.com/wrans/?id=2010-05-18.985.0&s=brian+lenihan+anglo+bond+holders#g987.0.r

You sure of that?
Who are the bond holders then?

[Declan]

All of those countries are significantly poorer than Ireland. What would be in it for them?
There is enough money stashed away by the top 20% to change the dynamic in Ireland.

I was being sarcastic Seafoid with those suggestions. Agree with you second sentence.

That blog together with the rolling stone article earlier show who really run things yet our 4th estate ignore them completely and we have to listen to the usual plethora of half arsed gombeens and vested interest commentators. Will we see anything happen? As that bollix Bailey famously said "will we f**k" 

[whiskeysteve]

Brian Lenihan said so

[whiskeysteve]

Just on that list of bondholders, the blog link I posted was in response to the original list posted by blogger Guido Fawkes on October 15th.

http://order-order.com/2010/10/15/anglo-irish-bondholders-should-take-the-lossesis-the-ecb-forcing-ireland-to-protect-german-investments/

'Guido has obtained the list of foreign Anglo-Irish bondholders as at the close of business tonight. These are the people whom Dublin's politicians really seem to care about... Between them they hold Anglo-Irish bonds with a face-value of €4,034,756,880.'

I don't have a notion how legitimate that list may be but its interesting that it was quickly picked up on by other blogs, including the Financial Times. Whether that gives the list more creedance, I don't know.

As the first link says, the presence of Goldman sachs on the list sticks out, and by extension the role of Peter Sutherland in the bailout.

http://www.zerohedge.com/article/are-irish-taxpayers-about-bail-out-goldman-peter-sutherland-stealing-his-own-people-give-vam

http://ftalphaville.ft.com/blog/2010/10/18/373161/aibaiting/

What do yous think?

[Declan]

What do yous think?

My thoughts are pretty much encapsulated in the first paragraph of the rolling stone article - Although it refers explicitly to Goldman Sachs insert "the market" " "bondholders" etc

The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who's Who of Goldman Sachs graduates

So I think Big Fat Suds and his mates have said the the clowns in our govt and DoF etc that keep doing what we tell you and we'll look after you and your families and f**k the little people

[Bogball XV]

The EU is running the show. Lenihan agreed the 4 years in front of the finance ministers of the rest of the EU. The bond markets expect the government to get the deficit in order and if they don't they won't lend any more money.  They probably won't get the deficit down to 3% by 2014 but have to make some sort of effort.

Why did Lenihan agree to that and why hasn't that changed since the cuts have doubled? Why was 4 years the target in the first place? Someone must have applied a science to it?

Either Lenihan thinks the bond markets are stupid or they actually are stupid.

yield hits 7.2% this morning, maybe not that stupid.  Dan O'Brien reckons it's 50:50 for a bailout now, i don't know why he's so optimistic

[Zapatista]

yield hits 7.2% this morning, maybe not that stupid.  Dan O'Brien reckons it's 50:50 for a bailout now, i don't know why he's so optimistic

They haven't forgot Cowen telling the world that there was no cheque to big for him to sign. We are doing exactly what Lenihan wants and pleasing the bond market. What Lenihan doesn't understand is that 7.2% is very pleasing indeed.

[seafoid]

The EU is running the show. Lenihan agreed the 4 years in front of the finance ministers of the rest of the EU. The bond markets expect the government to get the deficit in order and if they don't they won't lend any more money.  They probably won't get the deficit down to 3% by 2014 but have to make some sort of effort.

Why did Lenihan agree to that and why hasn't that changed since the cuts have doubled? Why was 4 years the target in the first place? Someone must have applied a science to it?

Either Lenihan thinks the bond markets are stupid or they actually are stupid.

yield hits 7.2% this morning, maybe not that stupid.  Dan O'Brien reckons it's 50:50 for a bailout now, i don't know why he's so optimistic

It does look like the game is up. Unless there is a Seamus Darby somewhere..

[Declan]

Lenihan confirms to Burton: bulk of Anglo bondholders have already been bailed out.
Labour's Finance Spokesman Joan Burton has received a reply to a written parliamentary question to the Minister for Finance Brian Lenihan TD. The reply confirms to her that the bulk of Anglo Irish bondholders have already been bailed out.

So there you have it folks. It's done and dusted all the bondholders got bailed out and yet our sovereign bonds have an interest rate of nearly 7%. Before we gave the guarantee we had an interest rate of 3% odd.Yet we were told that bailing out the Banks bondholders was the only way to appease the sovereign bondmarkets.

Game over and we're left with the bill

[seafoid]

Welcome to neoliberalism , Declan. Vote FF and this is what you get after the boom. The Anglo bonds are now held by the European Central bank and guaranteed by the State.   

[muppet]

Welcome to neoliberalism , Declan. Vote FF and this is what you get after the boom. The Anglo bonds are now held by the European Central bank and guaranteed by the State.

Churchill said the Irish have no sense of outrage.

Given the pantomime nowadays it might be more apt to say the Irish have no sense of 'it's behind you!'

[Cde]

for those of you who understand these things   why has bank shares really tanked in the last few days especially Bank of Ireland who have dropped nearly 20%

[Declan]

Welcome to neoliberalism , Declan

Unfortunately I'm all too aware of it Seafoid

Just chatting at lunchtime here with work colleagues and really the sense of fear is unreal amongst people. Genuinely don't know how they'll get through Christmas. Cutting back on all spending and if that's any barometer for the rest of the country you can forget about any recovery for a generation. 

This is from the Wall Street Journal today:

Governments on the edges of the euro zone face a serious new challenge: the prospect that investors who have shunned their bonds in recent months may abandon them for good.
While European leaders continue to say that all euro-zone government debts will be paid in full and on time, most big investors don't believe them. A survey of 582 investment institutions, carried out by Barclays Capital and released last week, showed 82% of them expected either debt restructuring, default or a full-fledged euro-zone crisis. (just as well we paid them to restore our confidence then! )
But the shift out of government bonds of Greece, Portugal, Ireland and even Spain is not just to do with the fear that investors will not be repaid in full and on time. It has also happened because the violent price shifts that have taken place over the last year mean that their bonds have lost many of the characteristics that most big bond buyers are seeking. "I think the biggest structural shift has been in market volatility," says Arif Husain, director of U.K. and European fixed income at AllianceBernstein, the asset-management firm.
He says investors usually buy bonds for one of four reasons:
• Stability. Many conservative investors are seeking security for their capital. After assuming for much of the last decade that they were buying safety in places like Greece—to the point where yields on Greek bonds fell almost to the levels of those on German bonds—they now discover it was an illusion.
Justin Knight, European rates strategist at UBS in London, says a host of investors—including U.S. bond funds with retail clients and non-European central banks, particularly in Asia—invested in such "peripheral" markets to secure higher yields, thinking at the same time they had secured low-risk and low-volatility. Now, they've been disabused, and have pulled out "not because they think governments on the periphery are going to default but because they shouldn't have been there in the first place," he says.
• They are seeking assets that move in the opposite direction to stocks.
This so-called negative correlation protects the value of their portfolio if prices of one asset class declines. Yet since the onset of the Greek crisis, at least until quite recently, prices of peripheral euro-zone debt have moved in tandem with risky assets such as shares, an undesirable positive correlation..
• Liability management.
Investors such as pension funds want to align their assets to their liabilities, so that their investments mature at the same time as future payouts to pensioners. Dutch pension funds, for example, thought they could match their liabilities with assets such as Spanish bonds. Now, the possibility of default has made them think again.
• Income generation.
Here the bonds from the periphery still do the job, now providing a bigger yield pick-up over German bonds than they did before, largely because the risks are perceived to be much higher.
The importance of investors in the fourth category is overwhelmed by those in the first three ,(so that totally screws us then..),and experts say their retreat is not a short-term phenomenon. "Bond markets have long memories," Mr. Husain says.
Mr. Knight notes another shift among a minority of investors: the changing of benchmarks to exclude all but the euro zone's core countries. These funds weight their purchases of bonds according to bond indexes, and have been underweight for some time in the peripheral markets. Now they want to formalize that shift, because they don't see a prospect of those markets providing low credit risk and low volatility (ok, so we are screwed for a generation -20/25 yrs not a decade)..
"We have several accounts that are changing their benchmarks. That's a big deal. You have to explain to your clients what you are doing and why you are doing it. It's not something that you do lightly and you don't do it often so they won't be changing back any time soon," he says.
These factors suggest long-term shifts in investor appetites that will radically shrink the universe of buyers for bonds from the euro zone's periphery for the foreseeable future.
Supply, meanwhile, is coming at full tilt.
Although governments are making stringent efforts to cut budget deficits, they won't be able to do that quickly enough to scale back soon the flood of issues needed to cover the deficits and repay maturing debt. For a year or two, gross bond issuance will be running at two, three or four times the levels of the pre-crisis years, Mr. Knight says—even as demand has shrunk Selling these bonds will be a challenge. ( = we have zero prospect of borrowing in the bond market that we exited last month (because "we had enough money to keep us going...for the moment...).As politicians discuss ways to prevent the next crisis at the European Union summit continuing Friday in Brussels, this dynamic in the bond markets suggests they shouldn't be too confident about having surmounted the current one.

[seafoid]

for those of you who understand these things   why has bank shares really tanked in the last few days especially Bank of Ireland who have dropped nearly 20%

It is probably linked to the news about the cuts of €15bn which show that the news for the economy and thus the banks' profit prospects are not great over the next 4 years.   

[seafoid]

Declan

I think the bond traders are goading the EU to do something about the worries over default. They are very sensitive at the moment.

A default by one of the peripheral countries could trigger another global panic. It's not as if the financial system is on solid ground at the moment.