“Spain is not Uganda.” – Spanish PM Rajoy
“Uganda does not want to be Spain.” – Uganda Foreign Minister
The ECB has settled no sovereign bond purchases under its SMP last week, the program is now nearing 5-months of inactivity. Pressures are building on Germans to allow monetizing and/or backstopping of peripheral bonds [George Soros]. In an interview with Der Spiegel, German MoF Schauble seemed to echo Soros. Sounds like the ball is back in Italy, Spain and Portugal’s court. This seems like very fundamental to the fiscal union approach but begs the question: what about all the excess existing debt?
SPIEGEL: What would a fiscal union have to look like so that Germany could accept euro bonds?
Schäuble: In an optimal scenario, there would be a European finance minister, who would have a veto against national budgets and would have to approve levels of new borrowing. It would be up the individual countries to decide how to spend the approved funds, that is, how to answer the question: “Should we spend more money on families or on road construction?”
Bottom line is that the markets are already restoring some discipline to European sovereign debt (minus Greece). The “safe haven” United States on the other hand is running amok. The specs are loaded to bear on long term Treasuries, one of the more crowded trades ever.
Source: JPMorgan
The rally in the Euro and the Swiss Franc brought out heavy short covering, and rather suggests these are primarily trades at this point, as opposed to big moves.
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Source: Wall Street Examiner
