Spain pays 5.1% for three month money

A

ASusilovic

There was a rather concerning auction of Spanish bills on Tuesday morning. Rarely does the front-end of the curve get this much attention.

Via Reuters:

RTRS-SPAIN SAYS 3-MONTH BILL AVERAGE YIELD 5.110 PCT VS 2.292 PCT AT PREVIOUS AUCTION

RTRS-SPAIN SAYS 6-MONTH BILL AVERAGE YIELD 5.227 PCT VS 3.302 PCT AT PREVIOUS AUCTION

5.1 per cent for three month money! These really could be the Last Days of the Euro.

Still, demand was strong.

RTRS-SPAIN SAYS 3-MONTH BID TO COVER RATIO 2.9 VS 3.1 AT PREVIOUS AUCTION

RTRS-SPAIN SAYS 6-MONTH BID TO COVER RATIO 4.9 VS 2.6 AT PREVIOUS AUCTION

Presumably from local banks desperate for something to repo at the ECB.

http://ftalphaville.ft.com/blog/2011/11/22/757931/spain-pays-5-3-for-three-month-money/

Almost double the rate a month ago....Ridiculous.
 
I would like to see if you can get your capital back in three months. It sounds like a risky Bet. What product will come out of Spain to pay for the redemptions when they Euro goes bust and the money is worthless.

A 5% interest rate may be great but when your exchange rate when its cashed is less than 30% of the value upon conversion. I think thats a net loss.

Please correct me if I am wrong since this is not my area of expertise.
 
Quote from ASusilovic:
Still, demand was strong.
Almost double the rate a month ago....Ridiculous.
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This is not strong demand... Primary dealers are mandated by the Tesoro to participate and bid for minimum amounts in these auctions. Next thing you know a few hours later they puke all this paper out in the mkt. We've seen it time and again in Greece, Portugal, Italy, Spain, Belgium etc.
 
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