Tuesday, November 1, 2011
ECB Buying As 450bps ITA Spread Becomes New Maginot Line
As we detailed 11 months ago, LCH.Clearnet now stands at the fulcrum of today's price action in Europe as the critical 450bps spread to Bunds on European sovereign debt - which will trigger considerable rises in margin requirements - is being aggressively defended thanks to the ECB's SMP. What is evident (and troublesome) is the confluence of the rally in Bunds (as Greece implodes) and unhedgeable risks in ITA bonds which means relatively aggressive buying in ITA bonds is doing little to
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