ON TIME – AS PREDICTED HERE – NOTHING NEW FOR OUR READERS:
The eurozone debt crisis is about to enter a dangerous phase as governments prepare to step up borrowing in the capital markets to fund their faltering economies.
Eurozone governments will attempt to issue double the amount of debt this month compared with August, with some strategists warning that some of the weaker economies could fail to raise the amount of money they need.
Spain, Portugal and Ireland, the so-called peripheral eurozone economies, are considered most in danger of being shunned by investors as worries persist over the health of their banks and economies. Greece is no longer a concern as it has emergency loans to cover its funding for the next two years.
Padhraic Garvety, head of rates strategy for developed markets at ING Financial Markets, said: “We are heading into a critical period as the chances rise that a government may fail to raise the money it needs.
“Spain, Portugal and Ireland are the obvious ones to worry about. Are investors willing to stay long, or buy the debt of these countries? I’m still not seeing investors willing to buy into the periphery.”
Eurozone governments will try to raise €80bn in September compared with new bond issuance of €43bn in August. Spain is expected to attempt to borrow €7bn in September compared with €3.5bn in August, according to ING Financial Markets.
Other strategists, however, insist governments will have little difficulty in funding themselves, even if they have to pay higher premiums or yields to attract investors.
They point to the fact that countries such as Portugal and Ireland have already raised most of the money they need to fund themselves this year.
Yet, government bond yields of the peripherals may come under further selling pressure. Yield spreads against Germany, the eurozone’s benchmark economy, could also widen. Last Tuesday, Ireland saw the extra premium it has to pay over Germany jump to a record 356 basis points.
Some strategists say the return of most investors from holidays this week could increase volatility in these markets. This is because many have put decisions on their portfolios on hold over the summer.
With most investors back at their desks, some could start selling peripheral debt in the coming weeks, particularly as the outlook for the global economy has deteriorated. This blog predicted investors would return exactly NOW. This blog predicted the seeds of SUPER CRASH in October would begin in September with trend lines being reported here. To ignore these predictions is to proceed without the information required to protect your family and your business. Events will begin to unfold fast and so many will be caught in total surprise.
The system is not reacting to prior recession history. The system is bankrupt and stripped of liquidity. When liquidity is most required cash is being horded because of fear. Without the asset of cash in CIRCULATION the system melts down completely. Profiteers taking specualtive gains at such pain truly profit to the system demise. Regulatory reform is the only solution. Cooperation is the only fix. To propel Super Crash the competition is replacing the cooperaiton for world trade – the result is historic and predictable. And now this.
In spite of some better than expected data out of the US last week, worries about a double-dip recession have increased. This would hit the weakest economies of Spain, Portugal and Ireland particularly hard.
However, it is not just the peripheral economies that could face problems borrowing in the markets. Even core countries, such as France and Germany, could struggle to attract investors.
www.ceospace.net
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