2011 & 2012 calendar schedule of Euro maturing sovereign bonds

The Rome-based Treasury sold 7.5 billion euros of new bonds today at record yields.

“These are hopelessly unsustainable yields and reflect the panic that is enveloping the euro zone,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said.

France has Euro 177bn, Italy 170bn and Spain 167bn bonds maturing which need to be refinanced through first quarter 2012. These do not include the additional new issues to finance the 2012 fiscal deficits likely to be incurred...

With too high a price to pay and so much maturing imminently... you are looking at an unstoppable freight train, with lights flashing and horns blaring about to hit the buffers. Do not let your investments get caught in the middle of the level crossing...this is the time to seriously consider precious metals like gold and silver.

Interactive Graphic on Worldwide Bank Debt - Who owes what to whom?

Click on image above to enlarge view

Click and visit this interactive link below to find out who owes what to whom...let's annex some respite from the relentless daily drumbeats of a worldwide financial edifice on the verge of collapse...winter maybe on its way but it doesn't mean we cannot have some light-hearted fun...
Source BBC News: Debt Web - Who owes what to whom?

These insightful graphics from the British Broadcasting Corporation valiantly attempt to peel away the layers of national banking debt each of the major world economies is owed from another.

I want to believe Santa Claus has a distant cousin somewhere in Harbin...

Notes on the data: 
The Bank for International Settlements data, represented by the proportional arrows, shows what banks in one country are owed by debtors - both government and private - in another country. It does not include non-bank debts. Only key eurozone debtors and their top creditors are shown. Although China is known to hold European debt, no comprehensive figures are available. 

GDP figures are the latest complete 2010 figures from the IMF. The percentage of gross government debt to GDP is also the latest IMF calculation. 

Overall foreign (or gross external) debt is taken from the latest 2011 World Bank/IMF figures and includes all debt owed overseas, including that owed by governments, monetary authorities, banks and companies. 

Gross foreign debt per person is calculated using the latest medium variant population figures from the UN Population Division.

A brief history of worldwide house price trends 1970 - 2008

Double click on image to enlarge view 

The striking aspect is the two boom cycles experienced by the United Kingdom and Netherlands in both the late 1980's and post 2001. Japan collapsed after 1991 and never recovered.

The 2000s was characterised by an era of cheap credit fueled by the Greenspan-led United States Federal Reserve which rippled worldwide that drew in Ireland, Spain and Australia. It's surreal and one wonders, within this context, the extent to which Fannie Mae and Freddie Mac were responsible for the 2008 US subprime housing bust.

The stand-out is Germany whose real house prices remained startling flat throughout most of this period...only to fall from the mid-2000s...reflecting a culture of renters and / or financial probity.

Alas, the historic data on mainland China is near impossible to obtain. The country didn't really open up fully for private enterprise until 1992. I'm sure the size of the current property bubble there will render its growth performance vis-à-vis 1970, to be off the charts.

Is 6% yield on sovereign bonds the crisis point of no return?

With Italian 10 year bonds having crossed a critical 6% yield threshold this week, it is worth seeing how other  sovereign bonds behaved. Let us look at the 20 week run-up period before the crossover...

For Greece, the chart starts on September 4th, 2009, and it first crossed the 6% threshold in the week of January 15th, 2010.

For Ireland, the graph starts on May 7th, 2010 (right before the original bailout) and it breaks 6% for the first time during the week of September 10th, 2010 (around the time of EFSF announcement).

For Portugal, the graph starts on May 14th, 2010 (right before the original bailout) and it breached 6% for the first time during the week of September 17th, 2010 (around the time of EFSF announcement).

For Italy the graph starts on June 17th 2011 (before the “big” July bailout) and it just crossed the 6% threshold.

Greece broke 6% and never looked back. It had a few rallies, but never really got close to 6% again. Portugal and Ireland had similar experience until quite recently. Portugal continues to track the path first blazed by Greece. Maybe Greece is unique, but from a time series study, Portugal seems right on track to follow it. Ireland has materially turned the corner, though it hasn’t improved recently. I don’t think it is a co-incidence, that Ireland had let some financial institutions experience severe write-offs, and then it turned the corner.

It is too early to tell what path Italy will follow, but at least for the other countries, they traded similarly prior to the breach, and followed similar paths after the breach. Italy is too big, that I don’t think it can turn like Ireland did. If Italy moves much further, I think it will follow Portugal and Greece. It has more debt than Portugal, Ireland and Greece combined.

Governments do not have months to fix this, they have weeks, and they have been squandering them.

Otherwise, austerity measures will become a regular fixture of day to day living for the populace going forward.

One can anticipate protection by examining purchasing an ETF called Proshares UltraShort Euro (NYSE:EUO) which increases in value by 2% for every 1% decrease in the value of the Euro. 

Click here for more info: Eurozone countries 10 year bond yield - the great unravelling

Eurozone countries 10 year bond yield history - the great unravelling

The great unraveling of the Eurozone has taken an ominous turn...bond yields have shot up in Italy as investors perceive the sovereign risk to have deteriorated. Greece, Portugal and Ireland have already floundered on the credit rocks.

Yesterday, Italy's yields acrossed the 7% Rubicon. A 7% yield is widely deemed as unsustainable and has previously led to bailouts and talk of default in smaller euro zone economies such as Portugal, Ireland and Greece. The crisis will not end simply with Berlusconi's excruciatingly slow demise. If the thinking now is that Italy also needs a bail out, there's a problem. Italy has two trillion euros of debt. That’s greater than the total amount of debt owned by Greece, Ireland, Portugal and Spain combined.

When the Euro was launched in 1999 there was much fanfare over the convergence of interest rates as sovereign risk appeared to equalise with markets not differentiating between economic fundamentals in each Eurozone nation. All started to unravel in 2008.

And, just by looking at the chart, you can tell that there's no way this implosion can be put back the way it was. If the euro is going to weaken, then the best way to play it is to buy the ProShares UltraShort Euro ETF (NYSE:EUO). Every 1% decline in the euro will move the ETF up by 2%.