Bond Attack on Italy and Spain Begins

Spanish bond yields jump
Spanish bond yields jump

Yields are falling in the stronger economies and surging in the weaker ones. Bloomberg:

Spain’s 10-year bond yield jumped 14 basis points to 2.25 percent, set for the biggest increase since June 15. The yield on Italian 10-year bonds climbed 14 basis points to 2.29 percent, having earlier surged as much as 57 basis points.

“The market is seeking haven assets as some investors perceive Grexit risk as being higher now,” said Vincent Chaigneau, London-based global head of rates and foreign-exchange strategy at Societe Generale SA. “That said, we expect to see some stabilization soon. If the Greeks vote to accept the creditors’ deal, then talks can resume and I think most of them still want to remain in the euro zone.”

The Greeks will vote next week to stay in the Eurozone. If that quells bond markets, it may avert a collapse for a while. If it doesn’t, then this is the end game. Unless China keeps crashing and bringing down other markets with it anyway. China is down another 3.5% today.


What is it with Bill Gross and his Morbid Death Blogs?

I like Bill Gross. He’s not exactly an Austrian economist, but with him it’s like Kol Dodi Dofek, the Voice of my Beloved Knocking. (No, Bill is not my beloved, it’s a concept people.) His voice knocks truth even though he doesn’t get the whole picture. מציץ מן החרכים. He stumbles onto truth when he’s being sincere. But he’s been extremely morbid lately as if he’s on his deathbed, and very open about it too.

He was the head of PIMCO, formerly the largest bond fund, which basically kicked him out because he couldn’t stop saying the truth that bonds were garbage. Last week or thereabouts he came out with this really morbid post about death and bonds and the end of all things. It was widely syndicated and I saw it everywhere. The best line from that post was this:

Funny how bonds were labeled “certificates of confiscation” back in the early 1980’s when yields were 14%. What should we call them now?

He was talking about negative yields, how basically people are now loaning say $100 to a government only to get back $98 in ten years. Negative interest, which makes no logical sense, unless people are assuming all banks will fail so they can’t put their money there.

The first paragraph of that post was especially gloomy. Here it is:

Having turned the corner on my 70th year, like prize winning author Julian Barnes, I have a sense of an ending. Death frightens me and causes what Barnes calls great unrest, but for me it is not death but the dying that does so. After all, we each fade into unconsciousness every night, do we not? Where was “I” between 9 and 5 last night? Nowhere that I can remember, with the exception of my infrequent dreams. Where was “I” for the 13 billion years following the Big Bang? I can’t remember, but assume it will be the same after I depart – going back to where I came from, unknown, unremembered, and unconscious after billions of future eons. I’ll miss though, not knowing what becomes of “you” and humanity’s torturous path – how it will all turn out in the end. I’ll miss thatsense of an ending, but it seems more of an uneasiness, not a great unrest. What I fear most is the dying – the “Tuesdays with Morrie” that for Morrie became unbearable each and every day in our modern world of medicine and extended living; the suffering that accompanied him and will accompany most of us along that downward sloping glide path filled with cancer, stroke, and associated surgeries which make life less bearable than it was a day, a month, a decade before.

It’s like modern Poe. Creepy stuff. And now he’s out with another one of these deathbed rants, even though I haven’t heard anything about him being sick. Saw it on Bloomberg, “The Amount of Money I’ll Give Away is Staggering, Even To Me”. Well, OK Bill, we get it , we’re all going to die, but what is going on with you? Why do you have to be so public about all of our imminent deaths?

Gross is the Bond King. He knows it’s all a sham and it’s about to break. Maybe he’s a little ashamed of being a part of this whole global scheme of governments borrowing and then taxing you to pay back the interest it owes you on its bonds.