In the sound and fury of eurozone sovereign debt activity on Tuesday, we forgot to take note of Belgium’s auction of short-term T-bills.
It was not good.
It was really not very good:
Yields on both the three-month and 12-month paper sold reached three-year highs. More to the point, they rose to these highs out of the blue compared to recent trading. The auction’s minimum target amount (€2.7bn) was also barely reached. You can check how the auction fared (compared to previous Belgian issues in 2011) here. Interesting the yield seems not to have improved on Wednesday.
“Buyers’ strike,” for a number of reasons, is a good way to describe the state of Europe’s sovereign debt market at the moment. It has really affected the lack of liquidity even in prime long-dated AAA bonds like those of France — see those vaulting spreads to German debt — but we think that it must really end up hurting sovereigns’ short-term refinancing needs, in the primary market (auctions) in particular. Spain had a T-bill auction on Tuesday with the same problems. Italian T-bills in the secondary market were (sorry to bring out the cliche) canaries in the coalmine before last week’s carnage.
As Macro Man writes, at some point even the Bundesbank has to realise that this constant drip-drip of dysfunction will blow up the “transmission of monetary policy,” the only object it allows for the ECB’s bond-buying.
Won’t it?
Related links:
No news is bad news – Ibex Salad
Eurozone’s leaking core – FT
While everyone is obsessed with sterilisation in Europe… – FT Alphaville